The US housing market has again moved toward greater disconnect between supply and demand, according to a Trulia report released Thursday. US home inventory has tumbled to a new low after the eighth straight quarter of decline as supply can not keep up with demand.
The drop in availability is being felt most acutely by those seeking starter homes. According to the latest Trulia Inventory and Price Watch, How Rising Home Values May Be Stifling Inventory, the number of starter homes has dropped 8.7 per cent in the last year. Those with the strongest recovery, on average, have experienced the largest decreases in inventory.
Housing Inventory, US: 3Q 2016
Trulia’s report Thursday segments the market, collecting data for starter homes, trade-ups, and premiums homes, and all sectors are suffering. Both trade-up and premium home inventory also dropped (7.9 per cent and 1.7 per cent, respectively). Overall, housing inventory sank to its lowest number on record.
Trulia analysts have a few reasons to explain why low inventory is persisting despite a moderate housing recovery: Investors bought up foreclosed homes during the recession and turned them into rental units; increasing price divergence, or price spread, between different sectors of the housing market has made it harder for existing homeowners
to trade up and free up inventory; and the slow pace of recovery means many homeowners remained underwater for much longer than expected. Trulia also found an slight correlation between the pace of the recovery and the housing inventory drop:
“These findings suggest that a moderate home value recovery doesn’t affect inventory much, but a strong recovery does and impacts inventory of starter homes the most.”