According to recently released findings from Trulia Inventory and Price Watch; this quarterly look at the supply of starter, trade-up, and premium homes on the market nationally and in the 100 largest U.S. metros found that falling inventory is strongly correlated with how long homes stay on the market.
“As inventory continues to shrink, the few homes that are available are flying off the market within a couple of months,” said Ralph McLaughlin, Chief Economist at Trulia.
With the plummeting inventory, fewer homes stay on the market after two months where supply has dropped significantly in the last five years. Supply kept falling in the second quarter of 2017, down 8.9 percent year-over-year, marking a record nine quarters in a row.
Current inventory conditions are also destroying affordability. For first-time homebuyers in the market looking for starter homes, it would require 39.1 percent of their monthly income to afford. In comparison, buying a trade-up home would still require 26 percent of their monthly income, and buying a premium home would require 14.3 percent of monthly income.
“With these declines, falling inventory has also pushed affordability of homes across all segments to new post-recession lows,” said McLaughlin.
In 2012, 57 percent of homes nationally were still on the market after two months, while today that number has fallen to 47 percent. Across metros, falling inventory also connects with how long homes stay on the market.
“In the tightest markets in California, only one in four homes are still on the market after two months. Clearly, this spring [did] not bringing the inventory relief buyers so desperately need. In today’s frenzied market, buyers must be prepared to move fast, be flexible with sellers’ timelines, and make multiple offers,” McLaughlin added.
Hurried homebuyers can mostly be found in the West, except for Columbus, Ohio, while the slowest moving markets are mostly in the South and Northeast.