The number of homes for sale nationwide tumbled 4.6% year-over-year in the last three months of 2018 across all price categories, according to the latest Inventory and Price Watch Report from Trulia®, a home and neighborhood site for home buyers and renters. This marks the ninth consecutive quarter of declining inventory; the last time inventory rose was in Q3 2016. However, there are signs of progress with the nation's most expensive housing markets seeing large inventory gains.

The drop in inventory is largely driven by the premium home segment where the number of for-sale homes fell 7.8% year-over-year (YoY), followed by modest declines across starter (2.2%) and trade-up homes (1.5%). Meanwhile, affordability has worsened across all housing segments as tight inventory and slow wage growth continues to put upward pressure on home prices. Nationally, starter home prices rose the most, up 13.9% from the last year. As a result, a typical starter-home buyer must now spend 41% of their income on a monthly mortgage payment, up from 34.2% a year ago.

2018 Q4 National Inventory and Price Watch

2018 Q4

Change, 2017 Q4 - 2018 Q4

Housing Segment
Median List Price
Share of Total
Inventory
% of Income Needed to Buy Median Priced Home in Segment
% Change in Median List Price
Percentage Point Change in Share
% Change in Inventory
Additional Share of Income Needed to Buy a Home (Percentage Point Change)
Starter

$139,500

23%

331,474

41.0%

13.9%

0.6%

-2.2%

6.8%

Trade-Up

$245,000

31%

438,203

25.9%

8.9%

1.0%

-1.5%

3.3%

Premium

$460,000

46%

644,034

21.9%

5.7%

-1.5%

-7.8%

2.2%

"After promising signs of slowing inventory declines last quarter, the news is mixed as we close out 2018," said Cheryl Young, senior economist, Trulia. "While more sellers are listing homes in expensive West Coast markets, most homebuyers must still contend with tight inventory that's down 24% from five years ago. Coupled with slow wage growth, prices continue to inch higher, worsening affordability within the starter home market and possibly putting homeownership out of reach for many first-time buyers."

Starter and Trade-Up Home Inventory Surges in Pricey California Markets Housing markets in the West experienced the nation's largest inventory gains despite the large dip in supply. Among the 100 largest U.S. metros, six of the markets with the biggest surge in inventory from last year were in California, most notably in San Jose (66.6%), San Francisco (36.5%) and Oakland (29.2%). This surge in every market except New York was driven by growth in starter and trade-up homes. In fact, the number of starter and trade-up homes in San Jose almost doubled from a year ago.

Where Housing Inventory Rose Most in 2018

U.S. Metro
Starter Home Inventory YoY
Trade-up Home Inventory YoY
Premium Home Inventory YoY
Total For-Sale Home Inventory YoY
San Jose, CA

91.4%

80.7%

25.3%

66.6%

Salt Lake City, UT

84.1%

39.6%

28.3%

45.3%

San Francisco, CA

48.6%

54.6%

16.6%

36.5%

Seattle, WA

14.1%

62.8%

26.3%

32.3%

Oakland, CA

35.9%

37.6%

11.1%

29.2%

Colorado Springs, CO

37.6%

77.7%

6.5%

28.0%

Orange County, CA

44.3%

36.1%

16.1%

27.7%

San Diego, CA

28.0%

46.8%

17.1%

27.6%

Los Angeles, CA

31.7%

21.7%

19.6%

23.5%

New York, NY

12.2%

16.7%

20.4%

16.9%

Starter Home Affordability Continues to Worsen Despite inventory gains in the most expensive housing markets, prices continue to rise and outpace wage growth – especially in the starter home category. This has further put homeownership out of reach for many first-time buyers. For example, a typical starter-home buyer in San Francisco where the median starter home lists for nearly $900,000, would need to spend an unrealistic 146.9% of their income to afford a home.

Where Starter Affordability Worsened Most in 2018

U.S. Metro

Starter Home Price

Starter Household Income

Starter Home Affordability (YoY)

San Francisco, CA

$895,000

$35,425

146.9% (+23.2%)

San Jose, CA

$759,250

$38,645

115.8% (+19.3%)

Oakland, CA

$485,000

$33,278

89.0% (+12.7%)

Los Angeles, CA

$399,950

$22,328

106.9% (+11.4%)

Miami, FL

$185,000

$17,952

71.8% (+10.9%)

Fresno, CA

$164,900

$17,250

61.0% (+10.0%)

Newark, NJ

$209,000

$27,560

56.8% (+9.7%)

New York, NY

$254,800

$21,412

78.0% (+9.5%)

Las Vegas, NV

$179,900

$23,458

47.5% (+9.5%)

Orange County, CA

$495,000

$34,351

85.7% (+9.0%)