The U.S. inventory of homes for sale was flat in the first quarter, compared with a year earlier, the first time since 2016 there wasn’t a decline, according to a Trulia report.
Inventory increased in 50 of the nation’s 100 largest metro areas, up from just 19 areas one year ago. Starter-home supply rose 3.5% year-over-year – the fastest annual growth rate observed in more than 6 years – while the number of luxury homes on the market fell 4.5%, the report said.
The increase likely is being driven by homes lingering on the market as high prices put them beyond the reach of first-time buyers, according to the report. About 54% of homes for sale were in the starter- or trade-up-home segments – in other words, the first few rungs of the housing ladder.
“The markets with the greatest growth in inventory are also markets where prices have rapidly risen to notoriously high levels and supply has been severely constrained over the past few years,” the report said. “This rapid appreciation has caused affordability to deteriorate more quickly in these areas, and the nascent rise in inventory may actually reflect an exhaustion of demand in these communities, more than it reflects a greater number of sellers listing their homes.”
The 10 markets with the largest gains in inventory are also among the nation’s most-expensive housing markets, including the San Francisco Bay Area, Seattle, Los Angeles and San Diego.
“Even in these markets, dramatic increases in inventory – especially among starter homes – have yet to stem the tide of declining affordability,” the report said.
Nationally, there were 273,282 newly-listed homes on the market during the first quarter, down 6.9% from the 293,481 in the year-earlier period. In other words, inventory growth was driven by homes that were listed in prior quarters.
“Inventory growth seems to be driven more by ebbing demand rather than an infusion of new supply,” the report concluded.
The first quarter data may be representing the tail-end of a housing slump caused by November’s eight-year high in mortgage rates that since then have fallen.
At the end of March, the U.S. average rate for a 30-year fixed mortgage had the largest one-week decline in more than 10 years, dropping to 4.06%, according to Freddie Mac. Since then, it has bounced around in a narrow band, and this week averaged 4.1%.
In March, pending home sales increased 3.8% as the cheaper financing costs brought more buyers into the market, according to the National Association of Realtors.
Last week, an index measuring mortgage home-purchase applications rose 5% from a week earlier and was 5% higher than the year-ago week, according to the Mortgage Bankers Association.
“We saw a good week for the spring home buying season,” MBA’s Joel Kan said in the report released on Wednesday.