Inventory Gains Were Erased During the 2019 Home Shopping Season

Inventory gains built up over six months in 2018 and early 2019 were wiped out completely – and then some – during this year’s home shopping season as inventory has fallen to its lowest level since at least 2013.

The housing trends that we’ve seen for much of the spring and summer months continued into the fall, according to the September Zillow Real Estate Market Report. Home values are growing more slowly than last year – though quarterly trends show the market may be re-accelerating – and inventory remains constrained.

Inventory grew year-over-year in each month between September 2018 and February 2019 – likely due to softening demand after a period of rapid price growth. The inventory drop was sharpest among the bottom tier of homes, which are often targeted by first-time and low-income buyers.

A dearth of new listings at the beginning of the home shopping season – new monthly listings were 8.4% lower than the previous year in April and 10.6% lower in May – contributed to the current shortage, as did lower interest rates that likely brought more buyers into the market. Recent data on existing home sales and new housing starts have shown signs of increased buyer demand.

While U.S. annual home value growth slowed again, falling to 4.8% year over year, the annualized rate of quarterly growth continues to accelerate, now up to 4.3%. Quarterly growth often provides a clearer picture of recent trends, and this acceleration is further evidence that the market may be reaching a turning point after a sustained cooling-off period.

“Housing appears to have renewed its place as a bright spot contributing to continued U.S. economic growth. The return of accelerating quarterly price growth, rising sales numbers and increasing home builder confidence and activity all point to closing out 2019 on a healthy note, despite greater volatility over the course of this year,” said Zillow Director of Economic Research Skylar Olsen.

Home values fell again in San Jose (down 10.7% year-over-year) and San Francisco (down 2.5%). Indianapolis (up 8.1%), Austin (up 7.6%) and Charlotte (up 7.1%) were the fastest-growing large markets.

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