Inventory Jump Could Give Home Buyers Welcome Relief
Zillow, Seattle, reported housing inventory saw “significant recovery” for the second straight month in June, indicating the market may be on the road to rebalancing after a long stint of being heavily in sellers’ favor.
But the latest Zillow Real Estate Market Report noted inventory remains low and demand is still strong, sending home value appreciation to new record highs for both monthly and annual growth.
“Intense” demand for houses over the course of the pandemic sent inventory plummeting to a low of 33% below that for April of the prior year, ramping up competition for houses and elevating prices, the report said. Inventory has started to recover since then, improving 3.1% in June and 3.9% increase in May. Inventory now stands at 29.2% below 2020 levels.
“Another month of rising housing inventory gives buyers some additional options and a little more bargaining power,” said Jeff Tucker, Senior Economist at Zillow. “While the level of inventory remains incredibly low by historic norms, it is now on a trajectory that should give buyers reason to hope for a cooldown in price growth this winter, consistent with normal seasonal trends.”
But the report noted inventory growth “still has a long way to go” before it balances out the market as relentless demand pushed appreciation into new territory again in June. Home value appreciation broke annual records for the second month in a row, notching 15% growth over last year–the highest Zillow has seen reaching back to 1996. The Zillow Home Value Index reached $293,349, up more than $38,000 compared to last June.
Annual appreciation among the nation’s top 50 metropolitan areas ranged from New Orleans’ quite healthy 10.1% to Austin’s astronomical 36.8%, sitting ahead of Phoenix’s 26.6%, the report said.
National home value growth continued to accelerate month over month from a revised 1.8% in May to 2% in June, a new record high in the series’ history. Growth in each of the past four months has been far above the pre-pandemic high of 1% set in the summer of 2005.
Monthly home value growth among major metros ranged from 1.1% in New Orleans to an “eye-watering” 5.1% in Austin, Zillow said. Monthly growth accelerated in 48 of the top 50 metros and basically held steady in Pittsburgh and Memphis.
Zillow economists forecast home values will increase just over 13% by June 2022, a downward revision from the firm’s May forecast. June’s forecast calls for 6.02 million home sales in 2021, a 6.6% increase over 2020 and a more bullish prediction than in May.
Rent growth maintained widespread momentum in June. The Zillow Observed Rent Index rose 1.8% month over month, pushing typical U.S. rents to just under $1,800. A strong recovery in the rental market over the past few months has led to 7.1% annual growth in June, the largest annual increase in the series’ history reaching back to 2015.
“This is partly due to rebounding demand in pricey urban markets that were previously offering bargains in the midst of downtown office closures,” Zillow said. Even discounting a weakened market one year ago, rents have risen 5.8% since March, the highest quarterly growth the firm has seen. The fastest monthly rent growth was seen in Sun Belt standouts Las Vegas (3.6%), Tampa (3.4%), Austin (3.4%) and Phoenix (3.3%). “Sunny, relatively affordable areas have led home value appreciation over the past year, and are now seeing outstanding rent growth as well,” the report said.