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There are very fewer homes for sale on the market these days, but there are even fewer starter homes.
The inventory of starter homes shrunk by 14.2% from a year ago during the first quarter of 2018, according to a report released Wednesday by real-estate website Trulia. Meanwhile, Trulia found that the number of homes on the market overall increased by 3% over the past year — almost entirely because of an uptick in premium homes for sale.
And that’s bad news for first-time buyers who are most likely to be on the hunt for a starter home. “This spring home-buying season, first-time home buyers may feel as if their American Dream might be a nightmare,” wrote Cheryl Young, senior economist at Trulia.
That may be somewhat dramatic, but as starter homes have become scarcer, they’ve also become more costly to purchase. The median list price for a starter home now stands at $180,931, up nearly 10% from the same period in 2017. Affording mortgage payments on such a home would eat up 41% of the median income, up from 37% last year.
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The higher cost of a starter home in most parts of the country doesn’t mean buyers are getting a better home, however. Starter homes are now 2% smaller than they were six years ago. They’re also more likely to be in need of renovation, with fixer-uppers accounting for 11.2% of starter homes now versus 10.3% in 2012, Trulia found.
Indeed, the report noted that the fierce competition to buy a home in the first place could be causing fewer sellers to invest money into repairs themselves. “Homebuyers are getting far less for their money,” Young wrote. “In fact, a fixer upper might even be a trade-up home in disguise; the price of repairs along with potential rental payments while a fixer-upper is being upgraded could push the true cost of the home into the trade-up segment.”