On Prices, Buyers and Sellers Seeing More Harmony

For the first time in more than two years, when it comes to price, home buyers and sellers are finally moving closer together, said Trulia, San Francisco.

A new Trulia analysis (https://www.trulia.com/blog/trends/mismatch-q12018/) found market mismatch–the price gap between search interest and available listings–flattened from a year ago, but dropped by 15% in the second quarter, falling to 11.1 from 13.1 the first quarter; the first such drop since prior to the start of 2016.

“In other words,” said Trulia housing analyst Felipe Chacón, “more homebuyers are searching at price points where listings are more common.”

But Chacón cautioned what looks like good news among very tough market conditions for starter home buyers comes with some hefty caveats. Rather than being a story of increasing inventory meeting high demand for starter homes, instead, searches are just shifting increasingly toward pricier options. “Regardless of the reason though, this means that starter home shoppers, who are more likely to be younger, might be getting hints of relief, but are not out of the woods yet,” he said.

Key takeaways from the Trulia analysis:

–Nationally, the mismatch gap shrunk to 11.1 from 13.1 last quarter as the share of searches for starter homes fell to 28.7% from 31.1%. “While part of this shift could be attributed seasonality, it is the first quarter to quarter drop we have seen and compares with mismatch increase from 9.7 to 11.1 during the same period last year,” Chacón said.

–The starter listing’s share continued to slide and is now down to 22.4% of all listings from 22.8% last quarter and first quarter 2017.

–Premium buyers got pinched this quarter for the first time in more than two years. Premium home searches made up 41.4% of all searches and comprised 52.5% of listings, down from a larger gap of 38.4% of searches going to 51.5% of listings last quarter and on par with the mismatch a year ago.

–What looks like starter home buyer relief on a national level may just be signs of shoppers giving up. Recent changes are driven by search activity growing more slowly for starter homes than for trade-up and premium homes.

–San Francisco saw the biggest improvement for starter home shoppers from last quarter as starter inventory increased to 40.2% from 36.1% of all listings and searches to those homes dropped to 42.7% from 45.5% of all searches.

“The tide on what has been a steady stream of bad news for most buyers, and especially starter home buyers, seems to be shifting, Chacón noted. “But stubbornly low inventory means that, rather than seeing the home buying process get less competitive for starter home shoppers, competition for shoppers in the premium market is beginning to look a little more like what it’s been like in the starter-home market for some time now.”