US Real Estate Report

US Real Estate Report

Low Inventory Pushing Up Home Values More Quickly than Expected

Buyers in the market for a higher-end home will have more options, while those looking to buy a less expensive or entry-level home will find very limited supply and rising prices.

– Experts predicted home value growth would slow to historic norms early this year, but low inventory, stronger wage growth, and low mortgage rates are pushing home values higher than predicted.

– Nationally, home values rose 4.9 percent over the past year to a median home value of $187,000.

– There are 3.4 percent fewer homes for sale in the U.S. than a year ago.

– There are 7.8 percent fewer entry-level homes for sale in the U.S. than a year ago.

Home values are appreciating faster than experts expected, rising almost 5 percent over the past year, according to the April Zillow® Real Estate Market Reportsi. There are 3.4 percent fewer homes for sale in the U.S. than there were 12 months ago.

Zillow forecasted home values would grow 2 percent from April 2015 to April 2016, and outside housing experts said they expect slower growth in coming yearsii. However, Zillow’s latest data show a different trend with home values currently appreciating at 4.9 percent — almost 3 percentage points faster than Zillow predicted a year ago — to a Zillow Home Value Indexiii of $187,000.

Shrinking inventory is the story of the summer home shopping season for those looking to buy a home and entry-level homes have been hit the hardest; the number of entry-level homes for sale is down almost 8 percent over the past 12 months. Stiff competition and high demand, in addition to low inventory, stronger wage growth and low mortgage rates, are driving up home prices across the country, especially for entry-level homes, which is forcing many want-to-be-homeowners into bidding wars.

Markets with the tightest inventory have some of the fastest rising home values. Over the past two years, Portland has seen an almost 40 percent decrease in the number of homes for sale, with home values up 15 percent over the past 12 months. Similar patterns hold true in hot markets like Dallas, Seattle, and Denver, where inventory is down more than 20 percent and home value growth is in the double-digits.

In addition to low inventory, home values are rising in response to a strong job market, higher-than-expected wage growth and persistently low mortgage rates.

Those looking to purchase a home will find more homes to choose from in the condo and luxury markets. Inventory is improving in these two markets due to high-end construction, with the number of homes for sale close to hitting positive growth. Home shoppers searching for a single-family home, or in the bottom or middle of the market, will have less to choose from.

“The struggle will continue for home shoppers this summer,” said Zillow Chief Economist Dr. Svenja Gudell. “New construction has been sluggish over the past year; we’re building about half as many homes as we should be in a normal market. There still aren’t enough homes on the market to keep up with the high demand from every type of home buyer. In many markets, those looking to buy a home in the bottom or middle of the market will need to be prepared for bidding wars and homes selling for over the asking price. This summer’s selling season’s borders will most likely be blurred again as many buyers are left without homes and will need to keep searching.”

Homes in the top third of the housing market have more frequent price cuts than homes in the bottom and middle of the market — 16 percent of top-tier homes had a price cut over the past year, compared to 11 percent of bottom-tier homes and 13 percent of middle-tier. Almost 12 percent of condos had a price cut over the past year, driven by more availability in the luxury condo market.

Metropolitan Area

Zillow Home Value Index (ZHVI)

YoY Home Value Change

Percent Inventory Change for All Homes

Bottom Tier Percent Inventory Change

Middle Tier Percent Inventory Change

Top Tier Percent Inventory Change

Condo Percent Inventory Change

United States

$   187,000

4.9%

-3.4%

-7.8%

-8.9%

0.3%

-0.6%

New York/Northern New Jersey

$   385,800

2.3%

-3.8%

-10.8%

-4.1%

4.9%

-10.0%

Los Angeles-Long Beach-Anaheim, CA

$   567,700

6.0%

-8.0%

-19.4%

-10.8%

-1.0%

-14.2%

Chicago, IL

$   196,200

4.5%

-9.8%

-15.1%

-16.7%

-1.8%

-21.8%

Dallas-Fort Worth, TX

$   183,700

12.6%

-21.0%

-32.1%

-35.1%

-11.9%

-33.6%

Philadelphia, PA

$   206,100

3.1%

-2.7%

2.3%

-8.7%

1.0%

-2.3%

Houston, TX

$   173,300

5.9%

7.1%

n/a

n/a

n/a

-5.2%

Washington, DC

$   363,600

1.7%

-5.9%

-13.7%

-5.8%

0.2%

-8.2%

Miami-Fort Lauderdale, FL

$   232,800

10.5%

18.0%

10.3%

16.6%

21.9%

28.7%

Atlanta, GA

$   164,000

6.5%

-12.5%

-19.7%

-20.7%

-3.8%

-4.2%

Boston, MA

$   390,300

5.5%

-6.4%

-22.3%

-14.0%

14.4%

-7.1%

San Francisco, CA

$   806,800

10.0%

-2.1%

-14.9%

0.1%

6.1%

11.9%

Detroit, MI

$   124,200

6.8%

-13.2%

-6.5%

-23.7%

-11.0%

-3.0%

Riverside, CA

$   307,300

7.6%

-5.2%

-2.1%

-12.8%

-0.5%

10.5%

Phoenix, AZ

$   220,600

8.8%

-8.0%

-20.2%

-6.6%

-4.1%

-15.6%

Seattle, WA

$   386,300

11.6%

-21.1%

-28.5%

-20.9%

-15.6%

-23.9%

Minneapolis-St Paul, MN

$   222,000

5.6%

-0.7%

-4.3%

-9.3%

5.6%

0.9%

San Diego, CA

$   507,100

5.6%

9.0%

-0.6%

13.3%

12.2%

8.6%

St. Louis, MO

$   142,900

5.4%

-8.1%

-7.0%

-12.5%

-5.1%

-11.0%

Tampa, FL

$   165,600

9.7%

-16.2%

-27.9%

-19.3%

-8.1%

-12.8%

Baltimore, MD

$   246,000

2.1%

-6.6%

-7.6%

-9.5%

-3.1%

-7.8%

Denver, CO

$   336,600

15.2%

0.1%

-2.3%

15.3%

-4.8%

6.8%

Pittsburgh, PA

$   127,200

2.0%

7.5%

14.1%

-2.3%

9.5%

-5.2%

Portland, OR

$   325,400

15.1%

-31.6%

-39.8%

-39.0%

-21.6%

-43.5%

Charlotte, NC

$   161,100

5.6%

-17.2%

-22.9%

-31.3%

-7.9%

5.4%

Sacramento, CA

$   339,600

7.8%

-11.4%

-15.6%

-17.9%

-4.3%

-24.5%

San Antonio, TX

$   151,500

6.8%

-9.0%

n/a

n/a

n/a

-24.9%

Orlando, FL

$   185,100

8.1%

-12.7%

-25.7%

-17.3%

-2.9%

-16.5%

Cincinnati, OH

$   143,400

3.6%

-16.7%

-19.3%

-25.6%

-8.3%

-15.7%

Cleveland, OH

$   126,500

3.3%

-12.8%

-16.0%

-16.7%

-6.9%

-14.0%

Kansas City, MO

$   148,100

5.5%

-22.5%

n/a

n/a

n/a

-16.7%

Las Vegas, NV

$   203,700

8.8%

-2.1%

-9.3%

-11.8%

9.9%

-3.4%

Columbus, OH

$   155,700

5.7%

-9.5%

-15.5%

-14.3%

-3.0%

-19.1%

Indianapolis, IN

$   130,200

2.0%

-18.0%

-10.1%

-27.6%

-15.7%

-29.5%

San Jose, CA

$   962,400

12.3%

1.3%

-3.8%

3.2%

5.8%

7.1%

Austin, TX

$   250,400

8.9%

2.6%

n/a

n/a

n/a

20.6%

About Zillow
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the biannual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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