Tight inventory has nagged the U.S. housing market all year, but in the last quarter of 2017, the number of homes for sale plunged 10.5 percent year over year — the largest decrease since 2013, according to Trulia.
The outlet’s quarterly Inventory and Price Watch report revealed that the number of premium, starter and trade-up homes for sale fell 10.5 percent since last year. Starter homes in particular saw the biggest drop — there were 293,000 starter units available in the fourth quarter of 2016 compared to 237,000 this year. High-end homes also saw a stiff 5.9 percent decline, but premium properties still occupy the largest sector of the housing market, much to the dismay of first-time homebuyers. In total, premium homes account for 53.1 percent of all available inventory, making it increasingly difficult for first-time buyers to get their foot in the door.
“While the number of premium homes on the market has seen a sharp fall, they continue to make up a larger share of the for-sale market, which spells trouble for first-time homebuyers,” said Ralph McLaughlin, Trulia’s chief economist. “Coupled with record-low inventory, saving enough money for a down payment will continue to be their biggest obstacle to homeownership.”
Should this trend continue, the report projected that first-time homebuyers will need to spend approximately 39.8 percent of their monthly income to buy a starter home. To buy a trade-up home, homebuyers will be expected to spend about 25.5 percent of their income, and premium homes will require homebuyers to dip into their savings by 14 percent.
Despite the steep decline in inventory and affordability, experts seem to remain optimistic that conditions will improve in the new year.
“While the inventory crunch continues, I’m cautiously optimistic that 2018 will be a year for inventory rebound,” McLaughlin predicts. “Sixteen percent of homeowners plan to sell a home in the next two years. If we see them follow through, there may finally be an uptick in inventory.”