National housing inventory hit its lowest level on record in the first three months of 2017, Trulia reported Wednesday.
The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year. Across different housing segments, starter and trade-up home inventory fell 8.7% and 7.9% year-over-year nationally. Meanwhile, the stock of premium homes remained relatively unchanged since last year, having fallen just 1.7%.
Trulia examined the supply of starter, trade-up and premium homes on the market nationally and in the 100 largest U.S. metros and found that markets with the biggest gains in home values since 2012 are facing the tight supply of for-sale homes. A typical starter-home buyer would need to dedicate 38.3% of their monthly income to buy a starter home – a 2.9-point increase from last year. Trade-up and premium homes, on the other hand, are still relatively affordable despite being more expensive.
Trulia said a strong recovery in home prices may be partly to blame for the large drop in inventory some markets have experienced over the past five years. Housing markets – including San Francisco, Seattle, Nashville, Tenn. and Colorado Springs, Colo., – which have had greater home value recovery since 2012 have experienced larger decreases in inventory. In other words, not only are buyers in the hottest markets likely to be priced out, potential sellers may be locked in to their existing homes.
“Recovering home values have proven to be a double-edge sword,” said Ralph McLaughlin, Trulia chief economist. “While homeowners across the country are thrilled to regain equity in their homes, many have not been in a hurry to trade up. This has added to the inventory gridlock that ties up would-be starter-home inventory from ever coming on to the market, further constraining supply and decreasing affordability.”
He added, “However, there continues to be an uptick in new construction – which should help increase supply in some inventory-constrained markets.”
