SAN JOSE (KCBS) – Despite low mortgage rates and attractive prices for starter homes in many pockets of the Bay Area, plenty of first-time home buyers are finding the door closed to them, nonetheless.

The reason: a substantial drop in inventory of lower-priced homes in the last year.

For instance, in San Jose, the number of homes on the market with a list price of $436,000 or less is down 47% this year. In San Francisco, there are 53% fewer homes on the market under $347,000 this year.

“In San Francisco and San Jose, especially, we’re seeing that the lower-end homes are seeing a huge shortage compared to what inventory levels were a year ago, meaning a lot of first-time home buyers who tend to buy in the bottom price tier are getting squeezed out of the market,” explained senior economist Svenja Gudell.

“Some sellers might want to wait it out a little bit longer if they can,” she reasoned, “because who wants to sell at the bottom? If you can get a little bit more money with home prices appreciating currently, and lastly, negative equity plays a large role because a lot of folks are under water and cannot sell their home even if they wanted to.”

KCBS’ Mike Colgan Reports:

“The biggest losers right now,” said Gudell, “are the first-time home buyers.”

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