Trulia: Inventory Crunch Now Hitting High-End Homes, Too

Lack of housing inventory, which has already hit starter and trade-up housing markets, has moved into premium markets, said Trulia, San Francisco.

In the past quarter, national inventory experienced its largest year-over-year decrease in more than four years, Trulia economists Ralph McLaughlin and Alexandra Lee wrote in a new blog ( They noted while the number of available starter and trade-up homes continue to dwindle, the supply of premium homes is now falling at rates not seen since 2013.

“It’s not getting any easier for potential homebuyers to find homes,” they said.

Trulia reported in the fourth quarter, U.S. home inventory decreased by 10.5% from a year ago, the biggest drop seen since Q2 2013. This is having a predictable and dramatic effect on home prices–depending on your perspective as a buyer or seller. Across starter, trade-up and premium homes, the past quarter’s listings were the most unaffordable on record; Trulia said homebuyers will have to pay 39.8%, 25.8% and 14.0% of their monthly incomes in each respective price category.

Premium homes are experiencing “historic” declines, Trulia said, with a 5.9% tumble in inventory in the last quarter, with the largest decreases in San Jose, Calif., Salt Lake City, and Rochester, N.Y.

“The third quarter of 2014 marked the highest growth in home inventory after the recession,” the authors said. “Since then, both total and premium home inventory have slid to early-2013 rates of decline. In 2012, homeowners were still reeling from the effects of the recession, with many selling their homes out of hardship. As the recession eased, inventory dried up in 2013, leading to the sharp year-over-year drop in that year. The drop we’re seeing now is approaching 2013 rates, but inventory levels are already lower than 2013 levels due to steady declines across the last three years.”

If record-level lows in inventory wasn’t enough, McLaughlin and Lee said, homes across all three price categories are also the most unaffordable they’ve been since Trulia started keeping track in Q1 2012. Measured as the share of monthly income required to purchase a home, unaffordability has ticked up to 39.8%, 25.8% and 14% for starter, trade-up, and premium homes, respectively.

The authors noted though premium home inventory is declining at historically rapid rates, it still constitutes a large portion of the market. With the share of trade-up homes unchanged from this time last year–hovering at 24%–premium homes have started taking up market space once occupied by starter homes.

“So, even though premium homes are the most unaffordable they’ve been in years, they’ve also become a larger part of available inventory,” the authors said. “If this trend persists, the market will become more and more saturated with homes that are unaffordable to even the top income brackets.”