The past two years have seen a shrinking for-sale inventory across California, causing buyer competition to hit an all-time high. But the frustration in lack of homes available has not been evenly distributed across home price tiers.

Nationwide, over half the home inventory for sale is valued in the top-third of all homes (the high tier), according to Zillow. High-tier homes tend to sit longer on the market, as fewer qualified buyers exist for this tier of homes than for low- and mid-tier homes.

Here in California, the inventory share is not quite as imbalanced, but the number of high-tier homes still outweigh mid- and low-tier homes for sale.

A word of caution: the chart above might mislead you into thinking more homes are being added to the high-tier for-sale inventory. In fact, while the share of homes in the high tier has increased dramatically since 2011, the number of homes for sale has continued to fall across all price tiers.

As seen in the chart above, the number of high-tier homes for sale regularly exceeds the number of low- or mid-tier homes available. But as total inventory has decreased steadily, homebuyers have begun to experience this dynamic more acutely.

Homebuyer demand’s long buildup

Today’s low inventory across all tiers is due to home sales unable to keep up with demand from homebuyers — many of them first-time homebuyers, who (with rare exception) stick to the low tier, where the shortage is worst.

Today’s first-time homebuyer generation is primarily made up of Millennials who came of age during the 2008 Great Recession. After years of delay following the recession and long recovery, these first-time homebuyers are now finally ready with steady paychecks and sufficient savings set aside for their first down payment.

And yet, it appears the housing market is not yet ready for them. This is frustrating for would-be homebuyers, and career-threatening for the real estate professionals who rely on a steady flow of agent fees to make a living.

The underlying problem here is not too many homebuyers — it’s not enough new homes.

Residential construction has performed below what is needed to keep up with adult population growth for years now. Further, when new construction breaks ground it’s almost always on high-tier property, selected to reward the builder with the most profit — especially important for builders when the cost of land is so high across most of the state.

The only instances where construction is built with low-tier homebuyers in mind is when local governments step in to provide builder incentives or directives.

The good news for first-time homebuyers — and the agents who represent them — is California legislators are well aware of the housing shortage in both low-tier and rental housing, and they are taking action to add more low- and mid-tier housing.

Expect construction to gradually pick up in 2018, pick up speed in 2019 and reaching a peak in 2020. This will directly precede the next peak in home sales, anticipated to arrive around 2020-2021.

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High-tier home inventory surplus spells trouble