Rise in home inventory won't necessarily help first-time buyers
Housing inventory hit positive territory for the first time since 2015, but starter home volume is at a low for recent years, according to Trulia.
Home inventory rose 3.3% year-over-year in the first quarter of 2018, but entry-level home supply hit a six-year low, signifying the rise in inventory may not be as helpful for first-time home buyers.
Starter home inventory fell 14.2% to 217,717 in the first quarter, while the median list price for the home type increased 9.6% to $180,931.
"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," Cheryl Young, senior economist at Trulia, said in a press release.
The quality of entry-level homes has diminished as rising home prices and growing mortgage rates push move-in-ready homes out of reach for first-time buyers. In this year's first quarter, entry-level home buyers had to spend 41.2% of their annual income to buy an average starter home.
In certain housing markets, starter homes have even become unattainable for average buyers. In San Francisco, Los Angeles and San Jose, Calif., entry-level home buyers would need to spend more than 100% of their income to afford a median-priced starter home.
Nationally, entry-level homes have become nine years older on average and about 2% smaller than the last time the starter home supply was this low.