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First-time homebuyers battle low inventory

by Peter Thomas Ricci

It’s getting harder for first-time homebuyers to find suitable starter homes

first-time-buyers-nar-profile-buyers-sellers

The Chicagoland housing market has become an increasingly precarious place for first-time homebuyers, according to a detailed new report from Trulia.

In a deep analysis of the nation’s housing stock, Trulia found that starter homes – the affordably priced properties that first-time buyers purchase – have declined considerably in the last four years, while the remaining inventory has become more expensive.

The report’s findings for Chicagoland were:

  • The median price for a starter home in Chicagoland is $97,950 in 2016’s first quarter, which is lower than many large metro areas.
  • Chicagoland’s starter home inventory, though, has declined by 47.3 percent in the last four years, while the median price has risen 10.6 percent.
  • Among buyers of starter homes, it requires 28.4 percent of their income to purchase such a property in Chicagoland, which is actually down 2.2 percentage points from 2012.

The situation was not much prettier on the national stage, where inventory has dropped 43.6 percent and starter homebuyers now need to put down 5.6 percent more of their income – which comes as an addition to the many economic problems of first-time homebuyers already face.

Starter Home Inventory on the Decline

Why has the inventory of starter homes fallen so dramatically? Trulia emphasized two reasons: first, investors  gobbled up thousands of distressed properties during the downturn, and converted them to rentals; and second, millions of homeowners in lower price points remain underwater or near-underwater on their mortgages, and are therefore unable to list their homes.

Here is how Chicagoland’s starter-home market compares with other metro areas:

U.S. Metro Median Starter Home List Price, 2016 Q1 % Change in Starter Home Inventory % Change in Median Starter Home List Price % of Income Needed to Afford Median Starter Home
Atlanta $75,450 -33.2% 50.9% 20.4%
Boston $235,000 -55.6% 23.7% 50.0%
Chicago $97,950 -47.3% 10.6% 28.4%
Denver $212,500 -77.0% 77.6% 39.6%
Houston $92,575 -74.0% 15.9% 24.9%
Los Angeles $329,000 -70.8% 64.6% 88.1%
Miami $130,000 -41.1% 86.3% 46.3%
New York $214,000 -25.2% 7.5% 55.8%
Philadelphia $59,700 -8.5% 3.5% 23.4%
San Francisco $714,000 -73.9% 78.6% 110.5%
Seattle $249,975 -68.1% 57.7% 47.5%

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