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In the last three months of 2018, housing inventory retreated 4.6% from the previous year, according to new data from Trulia’s Inventory and Price Watch Report.
Although this is the ninth consecutive quarter of declining inventory, Trulia notes that the nation’s most expensive markets are seeing large inventory gains.
According to Trulia’s analysis, the drop in inventory was largely driven by the premium homes, in this segment the number of for-sale homes fell 7.8% year-over-year. This was followed by a 2.2% decline in starter homes and a 1.5% decrease in trade-up homes.
Notably, Trulia points out affordability has worsened across all housing segments, which is largely attributed to tight inventory and slow wage growth.
As a result, starter home prices rose 13.9% from 2017, marking the most significant national increase. Furthermore, the average starter-home buyer now has to spend 41% of their income on a monthly mortgage payment, which is an increase from 34.2% last year.
“After promising signs of slowing inventory declines last quarter, the news is mixed as we close out 2018,” Trulia Senior Economist Cheryl Young said. “While more sellers are listing homes in expensive West Coast markets, most homebuyers must still contend with tight inventory that’s down 24% from five years ago.”
“Coupled with slow wage growth, prices continue to inch higher, worsening affordability within the starter home market and possibly putting homeownership out of reach for many first-time buyers,” Young concluded.
Trulia explains that starter and trade-up home inventory climbed particularly in expensive California markets. In fact, six of the 100 largest U.S. metros with the biggest surges in inventory were in this state. Perhaps least surprising, San Jose took the lead, climbing 66.6%, followed by San Francisco with a 36.5% increase and Oakland with a 29.2% boost.
“Despite inventory gains in the most expensive housing markets, prices continue to rise and outpace wage growth – especially in the starter home category,” Trulia writes. “This has further put homeownership out of reach for many first-time buyers.”
NOTE: Trulia’s report is based on homes listed the for-sale on its website from October 1 to December 1, 2018. The report calculated housing inventory within each segment in the 100 largest U.S. metro markets.