Starter home sales continue to lag in the second quarter of 2017, according to surveys, as do trade-up home sales and overall home inventory shrinks.
This according to Trulia’s most recent Inventory & Price Watch report.
“U.S. home inventory tumbled 8.9% over the year in the second quarter of 2017, and has now fallen for nine consecutive quarters. Inventory today is a full 20% less than it was five years ago,” said the online home buying and rental company. “As a consequence, homes are being snapped up by home buyers at the fastest clip since we started keeping track in 2012.”
But that overall market contraction is slight compared to what Trulia says is the significant decline in available starter homes for young people (and others) just beginning adult life.
“The number of starter homes on the market dropped by 15.6%, while the share of starter homes dropped from 23% to 22.1%,” according to Trulia’s survey. “Nationally, the number of starter and trade-up homes on the market has decreased substantially, falling 15.6% and 13.1% respectively, during the past year, while inventory of premium homes has fallen 3.9%.”
The contracting market means, of course, higher prices.
“The persistent and disproportional drop in starter and trade-up home inventory is pushing affordability further out of reach of home buyers,” according to Trulia. “Starter and trade-up home buyers need to spend 3.1% and 1.7% more of their income than this time last year, whereas premium home buyers only need to shell out 0.9% more of their income.”
- The number of trade-up homes on the market decreased by 13.1%, while the share of trade-up homes dropped from 23.2% to 22.1%. Trade-up homebuyers today will need to pay 1.7% more of their income for a home than last year;
- The number of premium homes on the market decreased by 3.9%, while the share of premium homes increased from 53.8% to 55.8%. Premium homebuyers today will need to spend 0.9% more of their income for a home than a year ago.
“Falling inventory has also pushed affordability of homes across all segments to new post-recession lows,” explained the company. “Starter home buyers have been hurt the most, with the median buyer needing to dedicate 39.1% of their monthly income to buy a starter home – a 3.1 percentage-point increase from last year and up from 31.7% in Q2 2012. Though trade-up and premium homes are still relatively affordable, the share of income these buyers would have to spend on such homes also reached post-recession highs.”