With rents still high, purchasing a starter home is on our minds here at Curbed—how much they cost, how to prepare finances before purchasing one, and where to find the best ones that fit our aspirational lifestyles.
Given the data, the dream of owning a home feels like a distant possibility for many of us. But a new report out from Trulia today suggests that even though the starter home market is tight, it’s not all bad news. As it turns out, low inventory does not necessarily a housing shortage (or higher prices) make. In fact, several markets like Columbia and Charleston, South Carolina have seen a drop in demand for first-time homes, which translates to more inventory—and falling prices.
In other words, in some metropolitan areas—20 out of 74—where demand has decreased, the prices of the limited inventory starter homes have also decreased. Meanwhile, decreasing trade-up and premium home inventories is happening at the same time that the demand for those homes is on the rise.
The Trulia Inventory and Price Watch looked at the national housing stock as well as the 100 largest U.S. metros from April 1, 2015 to April 1, 2016 and divided them into three distinct categories: starter homes (median list price: $157,072), trade-up homes (median list price: $275,262), and premium homes (median list price: $585,334).
Here are the other takeaways:
- Starter and trade-up home inventories are dropping at double-digit rates, but premium home inventories have only dropped 0.2%.
- The unaffordability of starter homes in California is spreading out to markets like Denver, Seattle, Portland, and South Florida.
- Nationally, home inventory across the board has dropped 6% over the past year—
- —but for starter homes, that number dropped 12.3%, while the percentage of starter homes on the market dropped from 25.6% to 23.9% in the past year. This translates to first time homebuyers having to pay up 1.3% more of their income towards buying a home than last year.
- It’s a similar story for trade-up homes, the inventory of which dropped 11.5%, while the share of trade-up homes dropped from 26.3% to 24.8%. Buyers of this type of home will have to pay out 0.8% more of their income for a home than last year.
There’s a lot more head-spinning numbers and data included in the study, so head on over to Trulia to pore over the full report.
- No Inventory, No Problem: Why Supply Doesn’t Always Matter [Trulia]
- Starter Home Inventory Drop Burdens First-Time Buyers, Report Reveals [Curbed]
- Millennials Look to the Suburbs, Not Cities, for First Homes [Curbed]
- Starter Homes in the United States: By the Numbers [Curbed]
- First-time homebuying 101: Tips for buying your first home [Curbed]