Trulia: Rising Home Prices Stifling Inventory

Trulia, San Francisco, said U.S. home inventory fell to a new low in the first quarter, the eighth consecutive quarterly decline.

Nationally, Trulia said the number of starter and trade-up homes continues drop, falling 8.7% and 7.9% respectively, during the past year, while inventory of premium homes has fallen by just 1.7%.

The report also noted the persistent and disproportional drop in starter and trade-up home inventory is pushing affordability further out of reach of homebuyers. Trulia Chief Economist Ralph McLaughlin said starter and trade-up homebuyers need to spend 2.9% and 1.6% more of their income than this time last year, whereas premium homebuyers only need to shell out 0.9% more of their income.

“A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years,” the report said. “On average, the more valuable a market’s housing is compared to pre-recession levels, the larger drop in inventory it is has seen.”

Trulia cited several reasons why inventory is low:
–Investors bought up much of the foreclosure home inventory during the financial crisis and turned them into rental units;
–Price spread makes it difficult for existing homeowners to tradeup to the next the segment; and
–Slow home value recovery was making it difficult for some homeowners to break even on their homes.