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Oakland Starter Homes a Non-Starter for First-Time Buyers

Study finds that it's harder to enter the market there than anywhere

A Trulia study shows a crisis for first-time homebuyers in America, but no one feels the brunt of the issue more than would-be homeowners in Oakland.

According to the study, Oakland is the hardest place for first-time homebuyers to enter the market. That city is followed by Los Angeles, San Jose, San Francisco, and Sacramento. (If anyone expresses surprise, it will likely be over the fact SF isn't higher on the list.)

The study, entitled "House Arrest: How Low Inventory is Slowing Home Buying," says that starter homes are, obviously, the lower-priced properties on the market. It says that starter homes in Oakland have a median price of $374,000. As the Oakland Tribune points out, that means a first-time buyers making $52,700 would shell out 69 percent of household income for a 30-year mortgage with 20 percent down. (The newspaper report notes that in San Francisco, where the starter home median is $714,000, new buyers making $62,000 would need to spend 110 percent of household income for the same terms.)

The study blames the crisis mostly on low inventory; noting that the lack of available homes is more pronounced in starter properties than in higher-priced ones. The report concludes that many homes have been taken off of the market by investors who turned lower-cost homes into rentals; that the owners of such homes who are still underwater are not willing to sell; and that rising prices are creating "homebuyer gridlock." Meaning, if it's harder to trade up, more homebuyers are likely to stay put. Or, if buyers have to move, they may be forced to trade-down, and possibly shrinking the pool of starter homes.