Trulia found the increase in supply was driven by a surge in premium homes
First-time buyers faced tighter competition in the first quarter as the inventory of starter homes plummeted to its lowest level in years, according to the Trulia Inventory and Price Watch.
With a 3.3% year-over-year increase, the national housing inventory hit positive territory for the first time during a first quarter since 2015. Trulia said the gain was driven almost entirely by a 13.3% increase in premium homes.
As a result, starting homes are becoming a non-starter for many buyers. Not only do they face fierce competition, but starter homes have also become more unaffordable and of lower quality.
Trulia said the median list price of starter homes increased 9.6% year over year during the quarter. Starter-home buyers now need to spend at least 41.2% of their income to buy a typical starter home. The 4.2-percentage-point increase is the largest year-over-year rise on record, to an amount significantly more than the recommended.
Starter homes are also less likely move-in ready, with fixer-uppers making up 11.2% of the market. This compares to an only 10.3% share of fixer-uppers in 2012. 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.
"First-time home buyers face a perfect storm this spring,” Trulia Senior Economist Cheryl Young said. “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."
