While Spring is traditionally thought of as the peak season for buying a new home, new data suggests that those looking for a starter home should wait until the leaves start to fall.
According to Trulia's Inventory and Price Watch report, the inventory for starter homes increases by 7 percent in the fall. Trulia considers the fall to run from October to the end of the December — also known as the fourth quarter. During this time, 70 of the largest 100 metro areas see their starter home inventory peak.
It's important to differentiate "starter" homes from "trade–up" homes and "premium" homes. For starter homebuyers, an affordable price is typically a much more important factor. So, when inventory is low and prices are high, finding the right fit becomes much harder. According to Trulia's report, the number of starter homes available have dropped over 20 percent from last year, causing first–time homebuyers to shell out 39.7 percent of their income to buy a starter home — a 2.3 percentage–point increase from last year. To put that into perspective, a premium homebuyer only needs to spend 14.2 percent of their income to buy a home.
While the current market for starter homes favors the seller over the buyer, things start to even out when the weather cools. And just as low inventory leads to higher prices, when inventory spikes in the fall, the listing prices follow suit and move lower.
It should be noted that not all inventory spikes uniformly across the country. Some metros see more available starter houses than others. So, where is the best place to look for a home? Go west, young homebuyer! Seven of the top 10 metros with the largest inventory spikes in the fourth quarter are on the West Coast or close to it. Here are the top 10 metros where starter home inventory is higher in the fourth quarter compared to when inventory is at its lowest, according to Trulia:
- San Jose, CA (42% higher)
- Colorado Springs, CO (34.7%)
- Portland Oregon (34.7%)
- San Francisco, CA (33.7%)
- Phoenix, AZ (32.8%)
- Fresno, CA (32.7%)
- Wichita, KS (31.7%)
- Denver, CO (30.3%)
- Grand Rapids, MI (29.1%)
- Cape Coral–Fort Myers, FL (28.7%)
So, if you're looking to buy a new starter home, I hear that the Plaza de Cesar Chavez in Downtown San Jose is really nice this time of year.
Have a comment or question about this post? Email us to let us know what's on your mind.