According to a recent report from Trulia, the country’s housing inventory tumbled to a new low in the first quarter of 2017 – marking the 8th consecutive quarter that a decline has been seen. Falling by 5.1% over the past year, homebuyers have now been limited by low inventory for the past two years despite home prices rising to pre-recession levels in many markets.
Each quarter, Trulia conducts its “Inventory and Price Watch” study, which looks at the national supply of starter, trade-up, and premium homes on the market. What’s interesting to note is that the markets with the biggest gains in home values since 2012 seem to be facing the tightest supply of for-sale homes.
When looking that the 100 largest metros in the U.S., Trulia’s study found that both starter-homes and trade-up homes witnessed the largest inventory drops year-over-year from the first quarter of 2016 to the first quarter of 2017. While starter-homes and trade-up homes fell 8.7% and 7.9% respectively, the stock of premium homes remained relatively unchanged since the first quarter of 2016 – falling just 1.7%.
During the past year overall, starter-homes went from filling 26.9% of the market to only 25.9%. Likewise, trade-up homes went from filling 24.1% of the market to only 23.03%. Premium homes, meanwhile, saw an increase in their share of the market from 50% to 51%.
In its report, Trulia pointed out several reasons for why the country’s housing inventory is falling. For one, the company believes that investors—who bought up many of the foreclosures during the housing crisis—are now using their properties as rental units. Price spread was also blamed, as Trulia explained that it can be difficult for homeowners to trade-up when home prices in different segments of the housing market diverge from each other.
Slow home value recovery, and its adverse effects on homeowners, was also brought up as a potential cause for the low inventory, because it makes it more difficult for some homeowners to break even on their homes and gain enough equity to sell.
With that in mind, however, Trulia did mention that the increasing of home prices creates a whole new issue. Too little of a recovery might make it difficult for homeowners to sell their homes, but will provide cheaper prices for those looking to buy. On the contrary, too much recovery might make it easier for homeowners to sell their homes, but will make it more difficult for those looking to buy.
For more information on Trulia’s “Inventory and Price Watch” study, check out the company’s article.