The decline and dearth of available homes was one of 2016’s big stories, and the lack of starter-home inventory will affect the market the most. According to Trulia’s Inventory and Price Watch, the number of available homes for the average first-time homebuyer dropped 12.1 percent last year, its sharpest year-over-year decrease in three years.
The inventory of starter homes, now totalling 293,059, comprises just 24.8 percent of the total number of homes.
If finding a starter home is difficult, then paying for it is tough, too. Based on the median list price of $164,920, first-time buyers must spend 38.5 percent of their income on housing; 1.9 percentage points higher than last year. The rule of thumb is to spend no more than 30 percent of income on housing, and lenders generally require home payments to be less than 36 percent of income.
Starter homes are becoming increasingly unaffordable in several popular markets, including Denver, Los Angeles, Miami, Portland, Ore., Sacramento, Calif., San Diego, San Francisco, and Tacoma, Wash. Each market experienced a 5 percent or greater increase in the share of income needed to buy a starter home in 2016 versus 2015.
The Trulia report is based on the housing stock from Q4 2015 to Q4 2016 in the nation’s 100 largest metro areas.
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