Lenders may start to see more homebuyers enter the market as the number of homes for sale is higher than at any point this year, according to Trulia.
Inventory is still down 2.5% in the third quarter from a year ago, but it declined at its slowest annual pace in years and is climbing in a number of local markets. Entry-level housing supply, which has been particularly low, inched up 0.4% nationwide.
As inventory depletion has pushed up property values, an uptick in starter home supply is a good sign for potential homeowners that have been priced out of the market altogether. While affordability still remains a hurdle, lenders can leverage lower down payment tools to assist borrowers more willing to explore options as more homes become available.
Entry-level home purchasers can expect to put 25.6% of their income toward a mortgage, which is up from a year ago. Buyers of trade-up homes should plan to put 24.4% of their income toward a mortgage and premium buyers can anticipate putting 21% toward a mortgage.
Some of the most expensive metropolitan areas, like San Diego and San Jose, Calif., where housing supply has grown 37.7% and 66.9%, respectively, are among cities seeing the biggest leaps in annual inventory.
"Homebuyers may be pleasantly surprised to see more homes on the market, as housing inventory starts to make a comeback after years of decline," Cheryl Young, senior economist at Trulia, said in a press release.
"While this is ultimately good news for frustrated buyers, years of steadily increasing prices mean that those hoping to buy a home will need to spend a bigger share of their income once they find one. Nonetheless, those buyers daunted by low inventory and high prices have reason to be cautiously optimistic as parts of the housing market begin to ease," she continued.
