SAN FRANCISCO–Dallas is the most “mismatched” housing market in the country, according to a new analysis that seeks to identify areas of the country where most people are shopping for starter and trade-up homes, but most of the listings are for premium properties.
Those seeking to find a starter home should head to Philadelphia, the same analysis found.
According to a report by Trulia, nationally, the average market mismatch score across the starter, trade-up, and premium price tiers rose 1.8 percentage points to 7.4 percentage points during the fourth quarter 2016.
“The widening gap between listings and searches underscores the difficulty home buyers face in locating an affordable home they like,” Trulia said. “More than half of Americans who had been in the market to buy a home during the past two years (58.5%) said the process was either somewhat or very competitive. This compares with 37.8% of those who were exclusively in the market for a rental during the same time period, according to a recently commissioned survey conducted online by Harris Poll on behalf of Trulia.”
Trulia defines “market mismatch” as its measure of “search interest versus available listings. In other words, it’s the difference between the price point where the bulk of searches occur and the average price point of listed properties. For instance, if 60% of buyers are searching for starter homes but only 40% of listings are starter homes, our market mismatch score for starter homes would be 20.”
Trulia said its most recent survey dives deeper into who and where people are feeling squeezed by the tight inventory of housing. Among its findings:
- Lack of starter and trade-up homes is indicating unbalanced markets. “We found a 5.7 and 5.3 percentage-point shortfall of listings relative to search interest in the starter and trade-up price categories and an 11 percentage-point surplus of listings relative to search interest in the premium price category, averaging out to 7.4 percentage points. This is what we call our ‘market mismatch score.’”
- Searchers and sellers are drifting apart when it comes to price. This compares with a market mismatch score of 6 and 5.6 during the fourth quarters of 2014 and 2015, respectively. Trulia said.
- Starter and trade-up homes are most sought after. 26.9% of all searches were for starter homes, while only 21.2% of listings were at that price level.
- The gap between searches and listings is similar in the trade-up category with 30% of all searches chasing only 24.3% of listings.
- Premium buyers have it easiest. This leaves potential buyers in the premium category with the best chances of experiencing a less competitive home buying process with only 43.5% of searches viewing 54.5% of all listings.
- Starter home hunters in Raleigh, N.C., and Colorado Springs, Colo., are feeling the most pinched with 14.0 and 13.1 percentage point gaps between search volume and listing availability.
- Philadelphia, on the other hand, has a surplus of starter listings relative to search volume with an 11.6 percentage point gap between them and a 13.2 percentage point shortfall in premium listings compared with searches to that price-tier.
“During the most recent quarter, of the largest 100 metros, 75 had a larger percentage of search interest in the starter homes category than percentage of listings that were actually starter homes,” Trulia said. “Ninety-two metros had a listing shortfall relative to search interest in the trade-up category. Meanwhile, only 11 of the largest 100 metros saw a larger percentage of search interest fall in the premium category compared with the percentage of listings in that same tier. This disparity, with increasing numbers of metros experiencing a shortage of starter and trade-up listings and fewer metros with enough interest to match the proportion of premium homes, is the largest it has been in at least two years. It leaves Americans who are in the market for a home increasingly chasing too fewer options in lower price ranges, and sellers of premium homes more likely to be left waiting longer for a buyers.”
The top 10 most mismatched markets appears below.