Zillow: Fewer Homes on Market Driving Up Prices, Locking Out First-Timers

Zillow, Seattle, said nearly 9 percent fewer homes are on the market than a year ago–and the majority of them are ones first-time buyers can’t afford.

The company’s monthly Real Estate Market Report said housing inventories have been falling since early 2015, resulting in higher prices for the homes that are for sale and in many cases, bidding wars that drive prices up further. The report said home values across the U.S. rose by 8 percent from a year ago to a median of $213,146. San Jose, Calif. and Las Vegas reported the greatest home value growth over the past year.

Zillow Chief Economist Svenja Gudell said more millennials are aging into their prime home buying years and looking to buy their first home, but there are very few homes on the market that are affordable for them. Among all homes on the market right now, just 22 percent are entry level, among the least expensive on the market.

“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,” Gudell said. “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.”

Gudell said 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.”

The report said inventory is down the most in San Jose, Las Vegas and Indianapolis. Home shoppers in San Jose have 26 percent fewer homes to choose from than a year ago. In Las Vegas, inventory is down 23.5 percent, and among the homes on the market, almost 70 percent are high-end homes, among the most expensive on the market. The median home value in San Jose rose 25 percent over the past year to $1.252 million. In Las Vegas, home values rose 17 percent year-over-year; in Seattle, by 15 percent.

Zillow also reported median rent across the nation rose 2.7 percent over the past year to a median payment of $1,447 per month. Sacramento, Calif., Riverside, Calif., and Seattle reported the greatest year-over-year rent appreciation among the 35 largest U.S. metros. In Sacramento, median rent rose 7.7 percent to $1,852. Median rent in Riverside and Seattle rose 7 percent and 4.7 percent, respectively.