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Trulia: Buyers Face Tough Spring Market As Move-In Ready Starter Homes Become Harder To Find, Pricier, Smaller, And Older

Ahead of spring house hunting season, housing inventory rose 3.3% nationally but the number of starter homes plummeted to its lowest level since 2012.

SAN FRANCISCO, March 21, 2018 /PRNewswire/ -- Today Trulia®, a home and neighborhood site that helps homebuyers and renters discover a place they'll love to live, released the findings from its quarterly Trulia Inventory and Price Watch. This quarter's report found that national housing inventory rose 3.3% year-over-year, driven almost entirely by a 13.3% increase in premium homes. This is the first time that inventory has hit positive territory during the first quarter since 2015. However, starter home inventory plummeted, hitting its lowest level in at least six years, and amid a 9.6% year-over-year increase in median list price.

Trulia's Inventory and Price Watch found that first-time buyers will face a tough spring market in 2018. Not only will buyers face fierce competition in a tighter and pricier housing market, the quality of available starter homes appears to have diminished.

 

2018 Q1 National Inventory and Price Watch

Housing
Segment

2018 Q1 Inventory

Change, 2017 Q1 - 2018 Q1

Median
List Price

Share

Inventory

% of Income
Needed to
Buy Median
Price Home
in Segment

% Change
in Median
List Price

Percentage
Point
Change in
Share

% Change in
Inventory

Additional Share
of Income
Needed to Buy a
Home

(Percentage

-Point Change)

Starter

$180,931

21.5%

217,717

41.2%

9.6%

-4.4

-14.2%

+4.2

Trade-Up

$311,234

22.9%

231,691

26.9%

7.5%

-0.5

+0.9%

+2.2

Premium

$646,188

55.6%

563,468

14.6%

5.2%

+4.9

+13.3%

+1.1

Note: Among the 100 largest U.S. metro areas. Share is the percent of for-sale homes that fall into each segment, which is defined separately for each metro. Median price for each segment is the stock-weighted average of the median price of each segment in each metro. Some point change estimates may be slightly different than stated values because our differing procedure occurs before rounding. The full data set can be downloaded here.

 

Starter Homes Becoming Non-Starter for Many Buyers
Not only will first-time buyers face fierce competition in a tighter and pricier housing market, the quality of available starter homes appears to have diminished. Today, starter homes are less likely to be move-in ready with fixer-uppers making up 11.2% of the market, up from 10.3% in 2012. Most notably, Camden, N.J, Philadelphia, and Oklahoma City saw their share of fixer-uppers among starter homes rise the most. Moreover, starter homes nationally are nine years older on average and about 2% smaller in terms of square footage, shrinking to 1,187 square feet from 1,211 square feet six years ago.

 

Where Share of Fixer-Uppers Among Starter Homes Rose Most

U.S. Metro

Fixer-Uppers as Share
of Starter Homes, 2012

Fixer-Uppers as Share of
Starter Homes, 2018

Percentage Point Change in Fixer-Uppers
as Share of Starter Homes, 2012-2018

Camden, NJ

20.0%

32.9%

+12.8

Philadelphia, PA

22.2%

30.7%

+8.5

Oklahoma City, OK

13.0%

21.1%

+8.0

Baltimore, MD

12.4%

20.1%

+7.7

Charlotte, NC

12.3%

18.6%

+6.3

Note: Among the 100 largest U.S. metro areas. The full data set can be downloaded here.

 

Starter Homes Completely Out of Reach in San Francisco Bay Area, Los Angeles, and Orange County
The ongoing inventory crunch continues to impact affordability across the country. Nationally, starter-home buyers now need to spend at least 41.2% of their income to buy a typical starter home – significantly more than the recommended amount. This 4.2 percentage point increase is the largest year-over-year rise on record. Regionally, California is home to the most unaffordable markets in the country. In fact, starter-home buyers in San Francisco, San Jose, Calif., and Los Angeles would need to spend more than 100% of their income to buy the median-priced starter home in those markets.

 

America's Least Affordable Housing Markets

U.S. Metro

Share of Income Needed to
Buy a Starter Home (Y-o-Y
Percentage Point Change)

Median Price of
Starter Home
(YoY % Change)

Change in Starter
Home Inventory
(Q1 2017 – Q1 2018)

San Francisco, CA

121.8% (18.0)

$820,550 (12.4%)

+0.6%

San Jose, CA

104.3% (13.6)

$692,296 (12.0%)

-20.4%

Los Angeles, CA

103.5% (13.2)

$389,933 (10.9%)

-9.8%

Orange County, CA

83.7% (7.2)

$461,333 (4.3%)

-11.3%

Ventura County, CA

79.6% (8.8)

$421,450 (7.2%)

-36.8%

Oakland, CA

76.6% (8.8)

$444,666 (8.7%)

-33.4%

Note: Among the 100 largest U.S. metro areas. The full data set can be downloaded here.

 

Quotes from Trulia's Senior Economist Cheryl Young:

  • "First-time home buyers face a perfect storm this spring. Affordable, move-in ready starter homes have become harder to find amid rising home prices and mortgage rates. While new home construction hit a 10-year high in 2017, these units have not translated into starter home inventory just yet."
  • "If you're looking to buy a fixer upper, proceed with caution. It may seem like a reasonable starter home but may be a trade-up home in disguise. In tight markets where bidding wars are common, sellers have little incentive to upgrade their properties before listing them. First-time homebuyers should keep that in mind as they assess the hidden costs that comes with fixing up a home, especially if it's an older home."

Methodology
The Trulia Inventory and Price Watch offers buyers and sellers deeper insight into the change in supply and affordability of homes, within three different segments of the market: starter homes, trade-up homes, and premium homes. Based on the for-sale homes listed on Trulia, this report calculates housing inventory within each segment nationally and in the 100 largest U.S. metros, from Jan. 1 to March 1, 2018. In the deeper analysis of starter homes, metro level characteristics such as square footage and age of home are reported as medians while national metrics are weighted averages of the 100 largest metropolitan areas. Fixer-uppers were identified using property listings descriptions that used terms such as "fixer," "as-is," "needs work," "deferred maintenance" and "TLC." For the full report and methodology, see here.

About Trulia
Trulia's mission is to build a more neighborly world by helping you discover a place you'll love to live. Homebuyers and renters use Trulia's website and suite of mobile apps to get a deeper understanding of homes and neighborhoods across the U.S. through personalized recommendations, insights sourced straight from locals, and 34 different map overlays that offer details on commute, reported crime, schools, nearby businesses, and more. Founded in 2005, Trulia is based in San Francisco, and owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG). Trulia is a registered trademark of Trulia, LLC.

Media Contact:
Daisy Kong
pr@trulia.com 
415-400-7391

 

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