Zillow Group IR Blog

November 2018 Real Estate Market Report

Inventory Climbs for Third Straight Month, But Don’t Call it a Comeback

  • The number of homes on the market in November rose 0.4 percent from a year earlier, the third consecutive month of modest gains following nearly four years of inventory declines.
  • In November, there were 1.6 million homes on the market – well below the 1.96 million homes for sale in December 2014, just before inventory started its multi-year plunge.
  • Pricey metros that until recently clocked some of the fastest rising home values are now experiencing slower growth.

Low housing inventory, a major contributor to a runup in home prices in recent years, has risen for three consecutive months – but it is climbing at a slow rate, more akin to bumping along the bottom than growing in any meaningful way.

The number of homes on the market in November rose 0.4 percent from a year earlier, a small increase that follows a 2 percent year-over-year bump in October and a tiny 0.1 percent boost in September. The gains follow nearly four years of inventory declines that were far larger, including a nearly double-digit drop as recently as March 2018.

In November, there were 1.6 million homes on the market nationwide – almost 400,000 fewer homes than in December 2014, just before inventory started its multi-year plunge.

Roughly twice as many homes were for sale in the top third of the market (675,823) as the bottom third (334,857), squeezing buyers on a budget.

Sluggish inventory growth likely was influenced by a spike in mortgage rates in November, when rates hit their highest level since 2011. Higher rates can keep potential sellers at home, not wanting to trade into higher-rate mortgages. Rising rates also give some buyers pause, because they increase monthly mortgage payments.

Inventory fell in 11 of the nation’s largest 35 metros, with biggest decline coming in Kansas City, Mo., where the number of homes for sale fell 14.9 percent. The largest inventory gains in November were along the West Coast, led by San Jose, Calif., with a 70.7 percent increase (to 2,902 homes for sale during the month). It was followed by San Diego (34.9 percent), Seattle (33.5 percent), San Francisco (33.4 percent) and Los Angeles (28.8 percent).

Home values cool in pricey markets

Pricey metros that until recently clocked some of the fastest rising home values are now experiencing slower growth.

Home value growth in the Seattle metro area, for example, continues to decelerate, slowing to 5.6 percent year-over-year in November – less than half the pace of growth clocked a year ago (12.5 percent in November 2017) and the slowest pace since December 2012. The median home value in the Seattle area is $486,400.

Similarly, the median home value in San Jose rose 11.2 percent, to $1.25 million in November, the highest median value among the largest 35 markets. But even that robust pace of appreciation was well below annual growth that topped 20 percent in seven months this year.

For the first time since September 2017, San Jose was not in the top spot for annual growth among the largest 35 markets. It posted the fifth-fastest annual growth, behind Las Vegas (13.9 percent), Atlanta (13.3 percent), Indianapolis (12.7 percent) and Charlotte, N.C. (11.5 percent).

The median U.S. home value climbed 7.7 percent – in line with its growth rate all year.

Rents are picking up again

Median U.S. rent rose 0.5 percent in November from a year earlier, up $7 to $1,449 a month – a small boost that follows two consecutive months of declines.

Among the largest 35 metro areas, the largest annual gain was in Orlando, Fla., where median rent climbed, 4.4 percent or $62 to $1,472 a month. The greatest drop was in Portland, Ore., where median rent fell 2.4 percent or $46 to $1,846 a month.

Check out Zillow Research for a closer look at the economy through the lens of the housing market.

Zillow Group December 2018 IR Roundup