Inventory Shortage at ‘Crisis Levels’ in Many Housing Markets

Zillow Inc., Seattle, said housing inventory shortages have left home buyers with 10 percent fewer homes on the market to choose from than a year ago and up to 40 percent fewer in housing markets where home values are appreciating fastest.

The company’s monthly Real Estate Market Report said for-sale inventory across the country is down 10 percent since December 2016 and has been falling on an annual basis for the past three years.

The report said the inventory shortage is most pronounced in housing markets where home values are appreciating the fastest, such as San Jose, Las Vegas and Seattle. In San Jose, Zillow reported 41 percent fewer homes on the market than a year ago, with the annual percentage change in inventory has been falling at a double-digit pace for the past nine months. Las Vegas reported 27 percent fewer homes on the market than a year ago.

“Tight inventory, fueled by a tight labor market and low interest rates, propelled home values to record heights in 2017, but the outlook is now much less certain,” said Zillow senior economist Aaron Terrazas. “Tax reform will put more money in the pocket of the typical buyer, but will limit some housing-specific deductions. Overall, this should increase demand for the most affordable homes and ease competition somewhat in the priciest market segments.”

Terrazas noted on the supply side, the market is “starving for new homes, but it won’t be easy for builders struggling with high and rising land, labor and lumber costs. Aging millennials and young families may be able to find more affordable new homes for sale this year, but they’ll most likely be in further-flung suburbs with more grueling commutes to urban job centers.”

The report said the median U.S. home value rose 6.5 percent over the past year to a record-high $206,300. San Jose, Las Vegas and Seattle reported the greatest home value appreciation over the past year. In San Jose, the median home value rose 21 percent to a $1.172 million. In Las Vegas, home values rose 14 percent; in Seattle, they rose 12.5 percent.

Zillow also reported median rent across the nation rose 2.6 percent since last December, the fastest pace of appreciation since June 2016, to a median payment of $1,439 per month. Sacramento, Calif., Riverside, Calif., and Seattle reported the strongest rent growth over the past year.