Low Inventory Pushing Up Home Values More Quickly than Expected

Buyers in the market for a higher-end home will have more options, while those looking to buy a less expensive or entry-level home will find very limited supply and rising prices.

- Experts predicted home value growth would slow to historic norms early this year, but low inventory, stronger wage growth, and low mortgage rates are pushing home values higher than predicted.

- Nationally, home values rose 4.9 percent over the past year to a median home value of $187,000.

- There are 3.4 percent fewer homes for sale in the U.S. than a year ago.

- There are 7.8 percent fewer entry-level homes for sale in the U.S. than a year ago.

News provided by

Zillow, Inc.

May 24, 2016, 08:00 ET

SEATTLE, May 24, 2016 /PRNewswire/ -- Home values are appreciating faster than experts expected, rising almost 5 percent over the past year, according to the April Zillow® Real Estate Market Reportsⁱ. There are 3.4 percent fewer homes for sale in the U.S. than there were 12 months ago.

Zillow forecasted home values would grow 2 percent from April 2015 to April 2016, and outside housing experts said they expect slower growth in coming yearsⁱⁱ. However, Zillow's latest data show a different trend with home values currently appreciating at 4.9 percent -- almost 3 percentage points faster than Zillow predicted a year ago -- to a Zillow Home Value Indexⁱⁱⁱof $187,000.

Shrinking inventory is the story of the summer home shopping season for those looking to buy a home and entry-level homes have been hit the hardest; the number of entry-level homes for sale is down almost 8 percent over the past 12 months. Stiff competition and high demand, in addition to low inventory, stronger wage growth and low mortgage rates, are driving up home prices across the country, especially for entry-level homes, which is forcing many want-to-be-homeowners into bidding wars.

Markets with the tightest inventory have some of the fastest rising home values. Over the past two years, Portland has seen an almost 40 percent decrease in the number of homes for sale, with home values up 15 percent over the past 12 months. Similar patterns hold true in hot markets like Dallas, Seattle, and Denver, where inventory is down more than 20 percent and home value growth is in the double-digits.

In addition to low inventory, home values are rising in response to a strong job market, higher-than-expected wage growth and persistently low mortgage rates.

Those looking to purchase a home will find more homes to choose from in the condo and luxury markets. Inventory is improving in these two markets due to high-end construction, with the number of homes for sale close to hitting positive growth. Home shoppers searching for a single-family home, or in the bottom or middle of the market, will have less to choose from.

"The struggle will continue for home shoppers this summer," said Zillow Chief Economist Dr. Svenja Gudell. "New construction has been sluggish over the past year; we're building about half as many homes as we should be in a normal market. There still aren't enough homes on the market to keep up with the high demand from every type of home buyer. In many markets, those looking to buy a home in the bottom or middle of the market will need to be prepared for bidding wars and homes selling for over the asking price. This summer's selling season's borders will most likely be blurred again as many buyers are left without homes and will need to keep searching."

Homes in the top third of the housing market have more frequent price cuts than homes in the bottom and middle of the market -- 16 percent of top-tier homes had a price cut over the past year, compared to 11 percent of bottom-tier homes and 13 percent of middle-tier. Almost 12 percent of condos had a price cut over the past year, driven by more availability in the luxury condo market.

Metropolitan Area	Zillow Home Value Index (ZHVI)	YoY Home Value Change	Percent Inventory Change for All Homes	Bottom Tier Percent Inventory Change	Middle Tier Percent Inventory Change	Top Tier Percent Inventory Change	Condo Percent Inventory Change
United States	$ 187,000	4.9%	-3.4%	-7.8%	-8.9%	0.3%	-0.6%
New York/Northern New Jersey	$ 385,800	2.3%	-3.8%	-10.8%	-4.1%	4.9%	-10.0%
Los Angeles-Long Beach-Anaheim, CA	$ 567,700	6.0%	-8.0%	-19.4%	-10.8%	-1.0%	-14.2%
Chicago, IL	$ 196,200	4.5%	-9.8%	-15.1%	-16.7%	-1.8%	-21.8%
Dallas-Fort Worth, TX	$ 183,700	12.6%	-21.0%	-32.1%	-35.1%	-11.9%	-33.6%
Philadelphia, PA	$ 206,100	3.1%	-2.7%	2.3%	-8.7%	1.0%	-2.3%
Houston, TX	$ 173,300	5.9%	7.1%	n/a	n/a	n/a	-5.2%
Washington, DC	$ 363,600	1.7%	-5.9%	-13.7%	-5.8%	0.2%	-8.2%
Miami-Fort Lauderdale, FL	$ 232,800	10.5%	18.0%	10.3%	16.6%	21.9%	28.7%
Atlanta, GA	$ 164,000	6.5%	-12.5%	-19.7%	-20.7%	-3.8%	-4.2%
Boston, MA	$ 390,300	5.5%	-6.4%	-22.3%	-14.0%	14.4%	-7.1%
San Francisco, CA	$ 806,800	10.0%	-2.1%	-14.9%	0.1%	6.1%	11.9%
Detroit, MI	$ 124,200	6.8%	-13.2%	-6.5%	-23.7%	-11.0%	-3.0%
Riverside, CA	$ 307,300	7.6%	-5.2%	-2.1%	-12.8%	-0.5%	10.5%
Phoenix, AZ	$ 220,600	8.8%	-8.0%	-20.2%	-6.6%	-4.1%	-15.6%
Seattle, WA	$ 386,300	11.6%	-21.1%	-28.5%	-20.9%	-15.6%	-23.9%
Minneapolis-St Paul, MN	$ 222,000	5.6%	-0.7%	-4.3%	-9.3%	5.6%	0.9%
San Diego, CA	$ 507,100	5.6%	9.0%	-0.6%	13.3%	12.2%	8.6%
St. Louis, MO	$ 142,900	5.4%	-8.1%	-7.0%	-12.5%	-5.1%	-11.0%
Tampa, FL	$ 165,600	9.7%	-16.2%	-27.9%	-19.3%	-8.1%	-12.8%
Baltimore, MD	$ 246,000	2.1%	-6.6%	-7.6%	-9.5%	-3.1%	-7.8%
Denver, CO	$ 336,600	15.2%	0.1%	-2.3%	15.3%	-4.8%	6.8%
Pittsburgh, PA	$ 127,200	2.0%	7.5%	14.1%	-2.3%	9.5%	-5.2%
Portland, OR	$ 325,400	15.1%	-31.6%	-39.8%	-39.0%	-21.6%	-43.5%
Charlotte, NC	$ 161,100	5.6%	-17.2%	-22.9%	-31.3%	-7.9%	5.4%
Sacramento, CA	$ 339,600	7.8%	-11.4%	-15.6%	-17.9%	-4.3%	-24.5%
San Antonio, TX	$ 151,500	6.8%	-9.0%	n/a	n/a	n/a	-24.9%
Orlando, FL	$ 185,100	8.1%	-12.7%	-25.7%	-17.3%	-2.9%	-16.5%
Cincinnati, OH	$ 143,400	3.6%	-16.7%	-19.3%	-25.6%	-8.3%	-15.7%
Cleveland, OH	$ 126,500	3.3%	-12.8%	-16.0%	-16.7%	-6.9%	-14.0%
Kansas City, MO	$ 148,100	5.5%	-22.5%	n/a	n/a	n/a	-16.7%
Las Vegas, NV	$ 203,700	8.8%	-2.1%	-9.3%	-11.8%	9.9%	-3.4%
Columbus, OH	$ 155,700	5.7%	-9.5%	-15.5%	-14.3%	-3.0%	-19.1%
Indianapolis, IN	$ 130,200	2.0%	-18.0%	-10.1%	-27.6%	-15.7%	-29.5%
San Jose, CA	$ 962,400	12.3%	1.3%	-3.8%	3.2%	5.8%	7.1%
Austin, TX	$ 250,400	8.9%	2.6%	n/a	n/a	n/a	20.6%

About Zillow
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the biannual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

ⁱ The Zillow Real Estate Market Reports are a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Real Estate Research. For more information, visit www.zillow.com/research/. The data in Zillow's Real Estate Market Reports are aggregated from public sources by a number of data providers for 928 metropolitan and micropolitan areas dating back to 1996. Mortgage and home loan data are typically recorded in each county and publicly available through a county recorder's office. All current monthly data at the national, state, metro, city, ZIP code and neighborhood level can be accessed at www.zillow.com/local-info/ and www.zillow.com/research/data.

ⁱⁱ Results from the Q1 Zillow Home Price Expectations Survey here where experts were asked about home value appreciation from December 2015 to December 2016.

ⁱⁱⁱ The Zillow Home Value Index (ZHVI) is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.

SOURCE Zillow, Inc.