Wednesday, Trulia, a home and neighborhood finder for homebuyers and renters, released a quarterly report on their Trulia Inventory and Price Watch. The report, which studies the supply of starter, trade-up, and premium homes on the market nationally and in the 100 largest U.S. metros, showed that the current inventory shortage is strongly correlated with how long homes are staying on the market.
Home inventory in the U.S. dropped 8.9 percent nationally year-over-year between April and June marking the ninth consecutive month of decline, according to Trulia. Compared to five years ago, todays inventory is 20 percent lower with current starter and trade-up homes decreasing 15.6 percent and 13.1 percent respectively. Premium homes have seen less of a decrease, falling 3.9 percent over the last year.
"Markets that have witnessed larger decreases in inventory have experienced larger declines in the share of homes still sitting on the market after two months,” Trulia Chief Economist Ralph McLaughlin said. “With these declines, falling inventory has also pushed affordability of homes across all segments to new post-recession lows."
Trulia reported that the falling inventory has also affected affordability of homes across all three home types studied. Typically, starter-homebuyers would need 39.1 percent of their monthly income to buy a starter home, which is a 3.1-point increase from last year. Trade-up homebuyers need 26 percent and premium homebuyers need 14.3 percent.
On average, Trulia found the more a market’s housing inventory has fallen over the last five years, the faster homes come off the market. Fifty-seven percent of homes in 2012 were still on the market after two months, however today that number has dropped 10 percent to 47 percent of homes still on the market after two months. The largest decreases in inventory, like San Jose, California and Oakland, California, have also seen significantly fewer homes for sale after two months. Buyers who have to act fast can be found in the West, excluding Columbus, Ohio, while the slowest moving markets are generally found in the South and Northeast.
"As inventory continues shrink, the few homes that are available are flying off the market within a couple of months,” McLaughlin said. “In the tightest markets in California, only 1 in 4 homes are still on the market after two months. Clearly, this spring is not bringing the inventory relief buyers so desperately need. In today's frenzied market, buyers must be prepared to (1) move fast, (2) be flexible with sellers' timelines, and (3) make multiple offers."