Listing inventory is taking a critical hit, with 9 percent fewer for-sale homes on the market now than one year ago, a slump not seen in four years, according to the May Zillow® Real Estate Market Reports. The Columbus, Ohio, San Jose, Calif., and Minneapolis, Minn., markets have seen the steepest declines, at around 30 percent.
Supply continues to drag behind demand due to a convergence of several conditions, says Zillow Chief Economist Dr. Svenja Gudell.
“Inventory has been falling for years with supply no longer meeting demand, and there are multiple reasons for the worsening situation,” Gudell says. “On the demand side, simple demographic change is contributing to incredibly high demand as millennials reach their prime home-buying years and begin to enter the market in droves. This is coupled with relatively low levels of new-home construction on the supply side insufficient to keep pace with demand, and what is built is largely priced beyond the reach of many of the first-time and entry-level homebuyers in the market.
“Thousands of single-family homes that were once bought and sold every few years prior to the recession have now been converted into rental properties by investors, trading hands much less frequently and further contributing to inventory shortages,” says Gudell. “And finally, in some still hard-hit markets, negative equity is likely keeping many homeowners of lower-end homes from listing their home for sale because they can’t afford to profitably do so.”
Home values nationally have appreciated 7.4 percent from one year ago, with the median at $199,200, according to the Reports. Values are up 13 percent in Seattle, Wash., from one year ago and roughly 11 percent in Dallas, Texas, and Tampa, Fla.
With homes on-market a mere 77 days in May, buyers can expect to continue experiencing a scramble to snap up supply, Gudell says.
“There is no silver bullet that will clear the market of all of these issues, and buyers frustrated by the status quo will likely have to remain patient and be ready to pounce once that perfect home does become available,” says Gudell.
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