What buyers want often doesn't align with homes available on market

The price point set by buyers shopping for a home often falls well below the median price in a market, according to a recent analysis by Realtor.com.

The study found that half of all people using the site to look at home listings were searching for a property priced under $288,000. This price is 9.1, or $27,000, below the median list price of homes listed on the site.

"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 at 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."

Hale said the gap between what buyers wish to pay for a residence and what they can find on the market is likely to blame for the slowing pace of home sales. She said the demand for smaller, more affordable homes is also driving up prices at the lower end of the market. For example, homes between 750 and 1,750 square feet have seen annual appreciation of 12.1 percent, or 3.5 times faster than the appreciation of 3,000- to 6,000-square-foot homes.

"Entry-level homes continue to be difficult to come by as the inventory composition shifts more and more toward higher priced homes," said Hale. "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."

The analysis that homes priced between $340,000 and $350,000 were the only ones where the supply of properties for sale was keeping up with demand. The interest in lower priced homes outpaced the available listings, while supply exceeded demand at higher price points.

Hale estimated that in order to correct the gap between what is available on the market and what buyers are looking for, approximately 94,000 homes priced between $100,000 and $340,000 would have to be built. She said this would represent a 15 percent increase in inventory to this price tier, where growth is currently flat. Homes priced over $750,000 are currently seeing the strongest annual inventory growth at 11 percent.

The analysis named Buffalo, N.Y. as the market where buyers were most likely to find what they wanted. The median search price of $225,000 in this market was 15.4 percent higher than the city's median listing price. The median search price of $249,900 in Memphis, Tenn. was 13.6 percent higher than the median listing price, while the median search of $372,736 in Baltimore was 13.3 percent higher than the median listing price.

Conversely, the median search price of $215,000 in Cincinnati, Ohio fell 21.8 percent—$60,045—below the market's median price of $275,045. The median search of $260,000 in Houston was 20 percent less than the market's median listing price, while the median search of $309,900 fell 16.3 percent below the median listing price in Minneapolis.

According to the National Association of Realtors, the median price for a home purchased in April was $267,000. The Realtor.com study put this price at about 15 percent, or $48,000, lower than the median price of a currently listed home.

The study estimated that the maximum price that a median U.S. household would be able to spend on a home purchase would be $245,000. This falls about 22 percent, or $70,000, below the median listing price and 8.2 percent lower than what the median buyer spends on a home purchase.

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