Lack of starter homes adding to the severe housing drought in the United States. By Diana Olick
The supply of homes for sale is now at the lowest level since the National Association of Realtors began tracking inventory 18 years ago.
While all real estate is local, the problem is national. From coast to coast, buyers shopping in this spring market are finding less and less. What is listed is going fast — and selling at a premium.
In Southern California, home sales in February were 14 percent lower than the average for the month going back 30 years, according to CoreLogic. There are plenty of potential buyers out shopping, but they simply can’t afford what they find.
“Activity continues to be constrained by the decline in affordability and the relatively thin inventory of homes for sale,” said Andrew LePage, research analyst at CoreLogic. “San Bernardino County, which has the region’s lowest median sale price and entices many first-time buyers and others priced out of coastal markets, was the only Southern California county to post a year-over-year increase in sales this February.”
Housing starts are still only about 75 percent of their historical average, and what the builders are putting up is in the pricier, move-up category. The biggest problem is starter homes — the severe lack of them. Builders say their costs for land, labor and materials are too high right now, and starter homes squeeze their margins.
The median price of a newly built home did fall 5 percent in February, according to the U.S. Census, which could be a good sign or a monthly aberration.
“It’s hard to understate how important it will be for builders to continue adding new inventory to the market, especially in the low- and mid-priced segments where so much of the current home buyer demand lies,” said Svenja Gudell, chief economist at Zillow, who applauded the February price drop.
“But a few months of good progress won’t meaningfully change the dynamics of this year’s home shopping season — inventory is tight, competition will be fierce, and buyers need to be prepared to weather some frustration and show a lot of patience