Gap Widens Between What Buyers Want and What’s For Sale

Half of all buyers are looking for homes priced at least 9 percent below the nation’s median list price of $315,000

SANTA CLARA, Calif. (June 26, 2019) — There is a wide gap between what buyers want and what’s currently available for sale, according to new research released today from realtor.com^®, the Home of Home Search℠. According to the study, half of all home shoppers are currently looking for a home priced under $288,000, which is 9.1 percent below the median list price of homes currently on the market.

“The price differences between what buyers are searching for, closing on, and what’s available on the market demonstrates just how big the gap is for entry level home buyers,” said Danielle Hale, chief economist for realtor.com^®. “Buying a first home has always been a challenge, but with such a slim number of entry-level homes available, it’s especially difficult now.”

According to realtor.com^® home search data, half of all home shoppers are currently looking for a home under $288,000, which is 9.1 percent or $27,000 below today’s median price of $315,000 for homes currently on the market. This is supported by the fact that the median sales price of homes purchased in April was $267,000 (NAR, Existing Home Sales data*), which is about 15 percent or $48,000 lower than the price of inventory on the market. Based on the analysis, currently, the only price range where supply is meeting demand for homes is between $340,000 and $350,000, with an imbalance below and above. 

The gap between what buyers are looking to purchase and current available inventory can be attributed to the 4 percent year-over-year decrease in the pace of home sales so far in 2019, according to Hale.

In order to promote sales growth and satisfy the imbalance between what buyers want and what is available, realtor.com^® estimates approximately 94,000 homes priced $100,000-$340,000 would need to be added to the market. That would mean a 15 percent increase in the number of listings currently available in the entry- to mid-price-tier, which is no small feat, especially considering inventory growth is currently flat in this category. By comparison, homes above $750,000 — the tier where inventory is growing the most — only saw an 11 percent yearly increase in April. 

“Entry-level homes continue to be difficult to come by as the inventory composition shifts more and more toward higher priced homes. This is causing smaller and more affordable homes to appreciate rapidly, resulting in a mismatch between what buyers are able to spend and what sellers expect to receive.”

This year, smaller homes (750-1,750 sqft.) have appreciated 12.1 percent, or 3.5 times faster than  mid- to large-sized homes (3,000-6,000 sqft.), which have appreciated 3.4 percent year-over-year.

Markets where buyers can find what they want 
As the gap between what buyers want and what is available continues to widen, buyers are beginning to search other parts of the market in an effort to close.

The best U.S. markets where buyers can find what they want is topped by Buffalo, N.Y., with a median list price of $194,950. It is followed by Memphis, Tenn. ($219,950), Baltimore ($329,050), Pittsburgh ($189,950), and Philadelphia ($279,950).

On average, buyers in the top 10 markets with the smallest imbalance search for homes that are 8.9 percent above the median listing price, demonstrating the average buyer can afford more than the median home for sale. Lower barriers to entry mean these markets have high home ownership rates on average of 66.6 percent and a relatively low median search price of $245,000, as well as a relatively small income percentage requirement of 25 percent of a buyer’s salary.

Markets with the largest discrepancy 
In contrast, the top 10 metros with the largest imbalance are associated with larger barriers to entry.

The U.S. top markets where there is the largest discrepancy between what buyers want and what is available is topped by Cincinnati with a median list price of $275,045, followed by Houston ($324,950), Minneapolis ($370,050), Indianapolis($284,950), and Atlanta ($339,050).

On average, the top 10 metros with the largest discrepancies have typical home buyers who are searching 15.3 percent below the median asking price, demonstrating the vast discrepancy of what people are looking for and what’s available for sale. Buyers in these markets also have a low average home ownership rate at just 64.6 percent, as well as a relatively high entry price point of $442,000. This price point has the largest income percentage requirement of 35 percent, which sits above the recommended 30 percent.

* National Association of REALTORS^® (NAR) Existing Home Sales Data for April.  May data published by the NAR shows the median search price of existing homes rose to $277,700.

About realtor.com® 
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