The number of homes for sale in January 2020 was down 8% from a year ago according to the January Zillow Real Estate Market Report. This, combined with the strong economy and low mortgage rates, means buyers will be competing for a limited number of homes during the Spring home shopping season.
“As the economic storm clouds on the horizon in early 2019 cleared up, we saw buyers return in droves, taking advantage of ultra-low mortgage rates,” said Zillow economist Jeff Tucker. “Our first look at 2020 data suggests that we could see the most competitive home shopping season in years, as buyers are already competing over near-record-low numbers of homes for sale.”
Housing inventory for January in the top-35 metros was down the most in Seattle (-27.6%), Phoenix (-24.5%) and San Diego (-23.1%). The bright spots, where the number of homes for sale rose in January, include San Antonio (+7.7%), Detroit (+6.4%) and Chicago (+0.3%).
Home Values Ready to Re-Accelerate
U.S. home values in January 2020 grew 3.8% from a year ago, continuing the month-to-month slowdown in residential price growth that started in April 2018. But January represented the smallest drop month to month during that period. And the persistently low home supply is a key reason why home value growth is expected to speed up again in the spring.
“The good news for buyers is that low mortgage rates are helping to make home ownership more affordable,” says Tucker. “And home builders are responding to the hot housing market by starting construction on more homes than at any time since 2007.”
The hottest large markets in terms of home value growth are Phoenix (+6.7%), Columbus (+6.2%), Charlotte (+5.4%) and Cincinnati (+5%). Home values fell year-over-year in San Jose for the 12th consecutive month. But San Francisco saw home values grow 1% year-over-year, breaking a streak of declines that dated back to May 2019.
Rent growth remains stable
Annual rent growth has hovered between 1.7% and 2.4% every month over the past year. The typical rent nationwide in January was $1,602, up 2.3% year over year but just $1 more than December 2019. Rents are growing faster than a year ago in 28 of the 35 largest U.S. metros, led by Phoenix (+7.9% annually), Pittsburgh (+7%), Cincinnati (+5.7%) and Las Vegas (+5.7%).