Photo: Francesco Crippa/Flickr
Average first-time homebuyers in the US were faced with the steepest year-over-year drop in starter home inventory in three years in Q4. To make matters worse, they’ll also have to pay, on average, almost 2 percent more of their income to buy a starter home, according to a new quarterly report from the online search portal Trulia.
The US housing inventory declined 9.1 percent year-over-year in the fourth quarter of 2016. This was the sixth consecutive quarter of year-over-year declines. The largest decreases in inventory were recorded in the starter home and trade-up home markets, which recorded year-over-year declines of 12.1 percent and 12.9 percent, respectively. Meanwhile, the premium market recorded a more “moderate” shrinkage of 5.6 percent from last year.
The decrease in affordability from last year was most the marked in the starter home market. Homebuyers looking for starter homes will now need to spend nearly 39 percent of their monthly income to buy a home, nearly 2 percent higher than last year.
The increase in required monthly income for starter homes was more than twice as high as the 0.9 percent trade-up home increase, and just shy of four times the premium home 0.5 percent increase from last year.
“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,” said Trulia’s chief economist Ralph McLaughlin.
McLaughlin added that buyers might not see any price relief if “President-elect Trump’s to-be-seen policies boost demand without boosting supply.”
But, as mortgage rates continue to rise, homebuyers in more pricey housing markets like 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.”
Click here to read the entire report.