Homebuying in Los Angeles is pretty much impossible right now for many people. We know that only about 27 percent of households in LA County can afford to buy a median-priced house. Long-time LA natives are probably still wrapping their heads around an $800,000 median in Echo Park and a $600,000 one in Northeast LA.
A new report out from Trulia doesn't paint a rosier picture. Instead, it details just how hard it is to break into the market for first-time buyers. The short version: "Not only are there fewer homes available to buyers of all income levels, those just starting out or making their first foray into home ownership are worse off than they’ve been in years."
To figure out these numbers, Trulia did a national assessment of housing affordability and inventory across the nation for three different types of houses: starter homes, trade-up homes, and premium homes. (Found by splitting a metro area housing stock into three price ranges.) The report found that, from 2012 to 2016, starter home inventory across the country has "dropped precipitously," as our friends at Curbed write.
This national trend is hitting big urban areas in California hard; three of the cities and counties where Trulia found the starter home inventory had "vanished" most dramatically were San Diego, Orange County, and San Francisco. Is it any surprise high housing costs are making people leave the state?
Though Los Angeles's starter home inventory has dropped by a hefty 70.8 percent, Trulia data shows, it didn't make the countrywide list of the worst areas. Where LA did rank nationally was in overall starter home unaffordability—not at all shocking. Trulia found that buyers need 28.2 percent more income to afford a median starter home's list price in 2016 than they did in the first quarter of 2012.
The median starter home, which listed at $329,000, according to Trulia, would eat up 88.1 percent of the median starter home buyer's income. The national average is 38 percent. (The report takes into account single-family houses as well as condos for all market segments, and is based on estimates of the property's worth, not list prices, in an attempt to avoid skewed data.)
And all that's if the buyer can find a house or condo to buy in the first place, with that drop in inventory.
As prices rise for starter homes, it has a ripple affect across all categories as "buyers must settle for smaller, less expensive homes than they might otherwise buy elsewhere," says Trulia. That means that people who in past years might be buying a slightly more expensive trade-up home could now instead be considering a smaller, cheaper house that falls into the starter category. This practice ends up "inflating prices past the affordability points for true starter-home buyers."
- House Arrest: How Low Inventory Is Slowing Home Buying [Trulia]
- Starter Home Inventory Drop Burdens First-Time Buyers, Report Reveals [Curbed]
- You Have to Earn 172 Percent of the Median Income to Buy a Median House in Los Angeles [Curbed LA]
- Everywhere in Northeast LA Now Has a Median Housing Price Above $600k [Curbed LA]
- The Median Price For Housing in Echo Park is Now $813,000 [Curbed LA]