With the spring homebuying season now underway, house hunters are entering a market with more shoppers than properties up for sale. In fact, the supply shortfall is so severe, it's on par with some of the lowest ebbs for inventory in recorded history, new data suggests.
For the eighth straight three-month stretch, the U.S. supply of housing slipped as the first quarter came to a close, down more than 5 percent compared to one year ago, Trulia reported. The dearth of for-sale properties is even more severe among specific housing types. For example, starter home inventory decreased nearly 9 percent nationwide and trade-up dwellings by close to 8 percent over the same year-long period.
High asking prices keeping many in neutral
Part of the reason for the paucity of property listings traces back to home values. For 60 consecutive months, prices have risen on a year-over-year basis, according to the National Association of Realtors. Presently, a median-valued home goes for approximately $228,000, and the median is even higher in specific parts of the country, like the West. A person or family looking to buy their first house would have to devote nearly 40 percent of their household income per month to mortgage payments, nearly 3 percent more than 2016. The same goes for trade-up homes, requiring roughly 2 percent more of monthly salaries, or what translates to 25 percent.
Ralph McLaughlin, chief economist at Trulia, noted how rising home values have their advantages and disadvantages.
"While homeowners across the country are thrilled to regain equity in their homes, many have not been in a hurry to trade up," McLaughlin explained. "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."
Inventory dip dramatic in major metros
Metropolitan areas have seen a severe plunge in inventory, down by double digits in many areas. For example, in San Diego, supply has plummeted almost 70 percent when comparing the first quarter of 2017 with that of 2012, Trulia reported. Similarly sizeable reductions are apparent in Seattle; and Colorado Springs, down 66 percent and 62 percent, respectively. Moneywise, the West is the most difficult housing market to enter. In February – the latest month in which data is available – the median there was $339,900, according to the NAR's statistics, a 10 percent increase compared to the same month in 2016.
However, the silver lining lies in the fact that more construction is underway. Starts in February increased 2 percent from January, Dodge Data & Analytics reported, the second consecutive month in which activity improved. Among single-family starts specifically, development rose 12 percent in the Midwest, 6 percent in the South Central and 4 percent in the West.
McLaughlin noted that this comes as good news, which will hopefully lead to more positives as 2017 plays out.
"There continues to be an uptick in new construction," McLaughlin declared. "[This] should help increase supply in some inventory-constrained markets."
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