First-time homebuyers face worsening starter-home shortage | January 6, 2017 | Pleasanton Weekly | |

Pleasanton Weekly

Real Estate - January 6, 2017

First-time homebuyers face worsening starter-home shortage

Lack of affordability is a key factor for new buyers early in 2017

Starter-home unaffordability continues to be a persistent problem in the Bay Area, as well as many other coastal housing markets, according to a recently released study by Trulia, a San Francisco-based company that provides information about properties for sale and rent and other data.

In its fourth-quarter report, Trulia said starter home unaffordability also continues in the Sacramento, Los Angeles, San Francisco and San Diego markets.

Among the 100 largest U.S. metros, these metros ranked in the top 10 annual declines in affordability for starter homes from 2012 to 2015 and remain in the top 10 for declines in affordability for starter homes from 2015 to 2016.

"As mortgage rates continue to trend upwards, home-buyers in the costly coastal housing markets in California and the Northeast may get some relief," said Trulia's chief economist, Ralph McLaughlin. "Rising rates will likely cool the fierce competition in these markets where inventory has been tightening and affordability has worsened."

The number of homes for the average first-time homebuyer saw its steepest year-over-year drop in three years, falling 12.1% since 2015. Moreover, these buyers will need to pay 1.9% more of their income on average to buy a starter-home in their local market.

The average starter-homebuyer will need to spend 38.5% of their monthly income to buy a starter home — a 1.9 percentage point increase from last year. This decline in affordability is more than twice as much for trade-up homes (up 0.9 percentage points) and nearly four times the amount needed to buy a premium home (up 0.5 percentage points).

Comparatively, buyers of trade-up homes and premium homes would each need to spend just 25.5% and 13.9% of their income to buy a home, respectively.

Nationally, housing inventory fell for the sixth consecutive quarter, dropping 9.1% from a year ago.

Across different housing segments, homebuyers saw the biggest decreases in starter and trade-up home inventory. The number of starter homes and trade-up homes on the market dropped 12.1% and 12.9% from this time last year, respectively. Meanwhile, premium home inventory fell a more moderate 5.6%.

"Tight inventory will still be a big obstacle to homeownership in many markets in 2017, but I'm cautiously optimistic that we'll see the bottom of the current housing shortage as the year progresses," McLaughlin said. "That said, buyers might not see price relief if President-Elect Trump's to-be-seen policies boost demand without boosting supply."

-- PRNewsire


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