The FINANCIAL — Trulia on December 14 released the findings from the Trulia Inventory and Price Watch. This quarter’s report found that the number of homes for the average first-time homebuyer saw its steepest year-over-year drop in three years, falling 12.1% since 2015.
Moreover, these buyers will need to pay 1.9% more of their income on average to buy a starter-home in their local market.
U.S. Housing Inventory Shrinks 9.1% Year-Over-Year
Nationally, housing inventory fell for the sixth consecutive quarter, dropping 9.1% from a year ago. Across different housing segments, home buyers saw the biggest decreases in starter and trade-up home inventory. The number of starter homes and trade-up homes on the market dropped 12.1% and 12.9% from this time last year, respectively. Meanwhile, premium home inventory fell a more moderate 5.6%.
Harder to Get Started for First-Time Home Buyers
Declines in the affordability of starter homes continues to plague first-time home buyers. Today, the average starter-home buyer will need to spend 38.5% of their monthly income to buy a starter home – a 1.9 percentage point increase from last year. This decline in affordability is more than twice as much for trade-up homes (up 0.9 percentage points) and nearly four times the amount needed to buy a premium home (up 0.5 percentage points). Comparatively, buyers of trade-up homes and premium homes would each need to spend just 25.5% and 13.9% of their income to buy a home, respectively.
Starter Home Crunch Squeezes Coastal Markets
In many coastal housing markets, affordability has eroded significantly over the last year, especially in Tacoma, Wash. and Portland, Ore. But in Sacramento, Calif., Los Angeles, San Francisco, San Diego and Miami, starter home unaffordability continues to be a persistent problem. Among the 100 largest U.S. metros, these metros ranked in the top 10 annual declines in affordability for starter homes from 2012 to 2015 and remain in the top 10 for declines in affordability for starter homes from 2015 to 2016.
QUOTES FROM TRULIA’S CHIEF ECONOMIST RALPH MCLAUGHLIN:
“Tight inventory will still be a big obstacle to homeownership in many markets in 2017, but I’m cautiously optimistic that we’ll see the bottom of the current housing shortage as the year progresses. That said, buyers might not see price relief if President-Elect Trump’s to-be-seen policies boost demand without boosting supply.”
“As mortgage rates continue to trend upwards, homebuyers in the costly coastal housing markets in California and the Northeast may get some relief. Rising rates will likely cool the fierce competition in these markets where inventory has been tightening and affordability has worsened.”
