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Prices Rise As Inventory Falls In Housing Market

It is more difficult now to purchase that first starter home than it has been for many years. An analysis by Trulia shows how the inventory of starter homes has been dropping while prices have risen.

S.F. has seen a nearly 74% decrease in the number of starter homes for sale. The city ranks ninth out of 100 major metro areas in percentage change in starter home inventory.

The number of homes for sale has been falling since 2012. Inventory has fallen from 1.4 million to 861,000 over the past four years. All segments (starter, trade-up and premium) have seen the contraction. Trulia attributes the drop in stock partly to investors buying foreclosed homes and turning them into rental units. The most important factor was the “the growing difference between premium home prices and trade-up home prices.”

Median prices have risen over the four years.  The impact was so great in the Bay Area that homebuilder Hovnanian withdrew from the region, citing the speculative nature of the market.    

California lags in housing affordability. Nine out of 10 cities with the largest drop in affordability are in the state. Residents in Oakland have to pay 70% of their income for a standard 30-year fixed mortgage to afford a starter home. This represents nearly a 30% rise from 2012.

Related Topics: Trulia, Affordability, home prices