The FINANCIAL -- On September 20, Trulia, a home and neighborhood resource for homebuyers and renters, released the findings from the Trulia Inventory and Price Watch.
This quarterly look at the supply of starter, trade-up and premium homes on the market nationally and in the 100 largest U.S. metros found that starter homebuyers should accelerate their house-hunting plans now as for-sale inventory increases and listing prices decrease in the fall and winter months.
Starter Homebuyers, Begin House Hunting and Go West
Starter homebuyers should ignore conventional wisdom about the spring home-buying season. Starter-home inventory peaks in October and actually rises 7% in fall months, compared to the spring. Regionally, the strongest season for starter homes in 70 of the top 100 housing markets is between October and December. That leads to listing prices that are about 4.8% and 3.1% lower in the winter and spring than in the summer, respectively.
Homebuyers in the West should especially pick up their house hunting efforts as seven of the top 10 metros have the largest inventory and price swings are in California, Colorado, Oregon and Arizona. San Jose leads the pack with a 42% seasonal difference, on average, between its fourth quarter peak and first quarter low point in the number of starter homes on the market. For discounts, Wichita, Kan., offers the biggest savings. Listing prices there are 18.6%, on average, from its first quarter low point to its second quarter peak.
Starter Home Inventory Falls More than 20% in the Summer
The number of starter and trade-up homes on the market declined 20.4% and 12.5% respectively, from the same period a year ago. But for premium homebuyers, the inventory picture wasn't as bleak—their segment declined 2.3% year-over-year. These drops follow the national trend, as inventory tumbled 9.1% year-over-year, marking the 10th straight quarter of inventory declines.
Starter and Trade-Up Homes Become Even More Unaffordable
For homebuyers seeking affordable homes, premium homebuyers only needed to spend 14.2% of their income, which was just a 0.7 percentage-point year-over-year increase. Meanwhile starter homebuyers and trade-up homebuyers were again hit hard. Starter homebuyers needed to shell out 39.7% of their monthly income to buy a typical starter home – up from 31% in the first quarter of 2013-- while trade-up homebuyers followed with 26% of their income needed to purchase a home in that segment.
QUOTES FROM TRULIA'S SENIOR ECONOMIST CHERYL YOUNG:
"Starter homebuyers should begin looking now. The fall season provides a great opportunity for finding the right home and neighborhood thanks to a bump in homes for sale on the market, followed by lower winter prices."
"Housing markets along the West Coast have long been plagued by tight inventory and worsening affordability. But it's not completely hopeless for would-be homeowners. The seasonal swings in listings and prices in the San Francisco Bay Area, Portland, Ore., and even Phoenix means buyers will likely find more homes for sale at a lower price in the fall and winter months."