The declining supply of affordable homes for sale is impacting first-time home buyers nationwide. In a recent survey conducted by Harris Poll on behalf of Trulia, more than half of American house hunters looking to buy over the past two years said the process was somewhat or very competitive.
But, some cities experience a particularly drastic gap in demand and available inventory. Trulia’s market mismatch analysis compared search interest and traffic to available listings within the largest 100 metros, pinpointing which areas of the country might be the most competitive in any given price category.
Here is a visual on the most mismatched markets frustrating house hunters:
What’s the Trend for House Hunters Seeking Starter Homes?
In the starter home category, generally the lower end of the market, the gap between searches and available inventory is 5.7 percentage points. For trade-up homes, the gap is 5.3 percentage points. Meanwhile, there was an 11 percent surplus for premium home searches.
The average came out to a 7.4 percentage point difference in what buyers want versus what buyers see.
Consideration of the following markets — where supply and demand balances differ — provides insights across categories:
Dallas has the highest average mismatch between supply and demand of all metros in the U.S. at 17.5 percentage points. While starter homes make up 18.1 percent of all searches, just 6.2 percent of Dallas for-sale listings meet the first-time home constraints. And, 32 percent of Dallas buyers are looking for trade-up homes, but only 17.6 percent of listings are considered trade-up value. Nearly half of all Dallas home searches fall into the premium class, where buyers can casually peruse over three-quarters of available inventory.
Nearly a quarter of Raleigh house hunters search for starter homes, competing for a tight 10 percent supply. Nearly the same percentage of searches target trade-up and premium homes at 38 percent. But, just 29.1 percent of Raleigh homes for-sale are trade-up while 60.9 percent are premium homes, demonstrating probable hurdles for mid-range home buyers. The average mismatch score across home price tiers in Raleigh is 14.9 percentage points.
Unlike Dallas and Raleigh, Philadelphia has enough starter homes to go around. Over 15 percent of Philadelphia home searches are for starter homes that match 26.9 percent of available listings. Trade-up searches, which represent 25.9 percent of all searches, match 27.6 percent of listings. High-end buyers struggle in Philly, where 58.7 percent of searches and 45.5 percent of listings match the premium home requirements. Given tighter supply in the luxury market, the premium home mismatch score in Philly is 13.2 percentage points.
The Bakersfield real estate market is significantly more balanced with a 1.4 percentage point difference between search traffic and supply. Of all searches, 21.3 percent are for entry-level homes and 21.1 percent of listings correlate. Trade-up home searches (26 percent) yield 24.2 percent of Bakersfield homes for-sale. Premium home supply and demand is nearly equivalent at 52.7 percent of all searches at 54.8 percent of all listings.
Declining Homeownership Drives Rental
Aspiring entry-level home buyers struggle in places like Dallas and Raleigh, but fare better in Philly and Bakersfield. Overall, not all real estate markets suffer pinched supply in the affordable range alone. However, the impact on the lower end of the market is suggestive of declining homeownership rates. Most entry-level buyers lack the financial breadth to increase their budget and their search scope. With fewer options available, demand drives higher sale prices, pricing out would-be buyers who are ultimately motivated to rent instead.
Written by Jennifer Riner on behalf of Trulia.