The 27% Drop: Housing Inventory in DC Area Falls Significantly Since 2012

by Nena Perry-Brown

The five-year change in inventory nationwide

Housing inventory nationwide has been greatly constrained over the past two years, and hit a new low during the first quarter of 2017, per a recent Trulia report. The report finds that U.S. inventory has fallen for eight consecutive quarters — and the dearth of supply is most-pronounced in markets where home values have experienced the strongest recovery.

The inverse relationship between inventory and home price recovery is certainly evident in the DC area, where an 11.3 percent drop in inventory between the first quarter of 2016 and the first quarter of this year is more than double the 5.1 percent year-over-year drop nationwide.

Perhaps a bigger point is that overall inventory in the DC area has dropped 27 percent since January 2012. The supply of starter homes has, unsurprisingly, declined more steeply than trade-up or premium homes, falling by 42.3 percent from 5,455 in 2012 to 3,147 in January 2017. Inventory of trade-up and premium homes declined during that period by 25.7 and 11.6 percent respectively.

The quantity of each type of house

Relatedly, it has also gotten consistently more burdensome over the past five years for prospective homebuyers in the DC area to afford a home. Starter homebuyers now spend 31.8 percent of their income to purchase a house compared to 24.9 percent in 2012. Trulia has previously defined starter homes in this area as those priced up to $280,000; the median price for this type of house was $214,983 in the first quarter of the year.

While this share is still below the standard affordability threshold, the steep increase in income needed to purchase is far greater than seen in other segments of the housing market. Purchasers of trade-up or premium homes currently spend 23 or 13 percent of their income on their home — five-year increases of 3.1 and 1.6 percent.

Factors such as slow home value recovery, the increase in investors buying up and either flipping or renting properties during the financial crisis and divergent prices in each segment of the market also contributed to the scarce housing supply.

Trulia culled quarterly data from the 100 largest metropolitan areas in the country. The report differentiates between starter, trade-up and premium houses by estimating the home value within the aggregate housing stock and dividing these into three groups. For houses whose listing price fell below the price cutoff between two classifications, the house will be considered part of the lower category. Affordability is also calculated according to the median household income terciles within each metropolitan area and using only homeowner incomes applicable to each housing category.

This article originally published at https://dc.urbanturf.com/articles/blog/inventory_in_dc_area_down_27_percent_over_past_five_years/12356

1 Comment

  1. Joseph Seriki said at 2:48 pm on Thursday March 23, 2017:

    Higher acquisition prices multiplied by high interest rates(hard-money)are leaving less margins for builders. Its awesome people are now getting better value for their non renovated properties. It would be nice to see hard money lenders or construction lenders start to adjust rates to encourage growth with higher acquisition costs. Once we find a medium on that inventory should shoot up. Until then expect to fight over anything that’s nice and editors here will have several more stories of properties closing over the asking price.

Comments are closed.

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