Zillow Group IR Blog

March 2018 Real Estate Market Report

Inventory Remains at Historic Lows; Majority of Homes For Sale are Higher End
  • Home shoppers have almost 9 percent fewer homes to choose from than a year ago, and more than half of them are high-end homes.
  • Home values across the U.S. rose 8 percent since last March, to a median of $213,146.
  • U.S. median rent rose 2.7 percent over the past year, to $1,447.

There’s a serious mismatch in the U.S. housing market right now: The majority of homes available to buy aren’t the kind of homes the majority of buyers are seeking. And the limited inventory of those more sought-after homes is contributing to their more rapid appreciation.

The total inventory of homes for sale nationwide fell 8.6 percent in March from a year ago, the 38th consecutive month of annual inventory declines, according to the March Zillow Real Estate Market Report. This general supply shortage is painful to most buyers, doubly so because demand is incredibly high, driven in large part by a good economy and the large millennial generation beginning to age into their prime home buying years.

And because they’re generally working with a more limited budget, these late-twenty/early-thirtysomethings are typically in the market for a less-expensive, entry-level home valued in the bottom-third of all homes. But as of the end of March – traditionally the first month in the busy spring home shopping season – more than half (51.4 percent) of all homes for sale nationwide were in the most expensive one-third of the market, not the least. Only about one in five (21.9 percent) U.S. homes for sale in March were in the entry-level, bottom-third.

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Adding salt to the wound for entry-level buyers is the fact that not only is supply in that segment more limited, it’s also falling more quickly – and getting more expensive more quickly, too. Inventory of entry-level, bottom-third homes fell 15.3 percent year-over-year in March, compared to a relatively slight 4.9 percent annual decline in inventory among top-third homes. And the median U.S. bottom-third home grew 11.5 percent in value over the past year, more than double the annual growth of top-third homes over the same time (5.6 percent). The typical, middle-of-the-road U.S. home appreciated 8 percent year-over-year in March, according to the Zillow Home Value Index, to a median value of $213,146.

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That rapid appreciation, a classic symptom of supply unable to match demand, makes it even harder for the kind of first-time and or lower-income buyer seeking an entry-level home to save for a down payment and make a competitive offer. And given that many of these would-be buyers are likely currently renting, any increase in rent means more money going to their landlord, and less money going to savings.

And unfortunately for them, rents are rising too. The median rent nationwide rose 2.7 percent over the past year to a median payment of $1,447 per month, according to the Zillow Rent Index. While national year-over-year rent appreciation has slowed considerably from a high of 6.6 percent reached in summer 2015, rents nevertheless have grown on an annual basis in each of the past 67 months.

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This year’s home-shopping season is shaping up to be even crazier than last, and sadly, the group that will have the hardest time is first-time and lower-income homebuyers. These buyers will be competing for the few entry-level homes on the market, which are also the ones appreciating the fastest because of extremely high demand. One way to take the edge off would be an increase in inventory, but that is easier said than done. There are some signals a shift may be coming – construction activity is at its highest point in a decade – but buyers shouldn’t hold their breath. Getting pre-approved for a mortgage and finding an agent you trust can go a long way in helping buyers act quickly once the right home does become available in this otherwise tight and stressful housing landscape.

Zillow Group March 2018 IR Roundup Zillow Group April 2018 IR Roundup