The starter home market has shifted from available and affordable to smaller, more expensive, and rare. Starter home inventory was down 14.2 percent in Q1 2018 YOY, and the median starter home price increased 9.6 percent over that period.
The share of annual income required to afford a median-price starter home has crossed over into cost-burdened territory. From the first quarter of 2017 to the first quarter of 2018, the share of income needed to buy a starter home increased 4.2 percent to a total of 41.2, per Trulia's study, 11.2 percent beyond the cost-burdened threshold of 30 percent.
The rise in overall inventory masks the lopsided supply changes across housing segments. While inventory is up 3.3 percent, this quarter’s year-over-year increase has been driven almost completely by a 13.3 percent annual increase in premium homes. Meanwhile, starter home inventory plummeted 14.2 percent. Nationally, in fact, starter home inventory dipped to the lowest number since this report started keeping track at the start of 2012.
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