Housing Inventory Shortage Turns Corner as Sellers Enter Market

Volume of for-sale listings nationwide on Zillow has improved since the beginning of 2013 as the spring selling season eases national inventory shortages, even though the number of listings is down in early June compared to one year ago.

Despite an overall 12.2% drop year-over-year in the number of listings on Zillow in June, it’s a less severe crunch than the 17.5% shortfall recorded in January, according to the real estate marketplace service. Even with seasonal adjustments, there was a 5.3 percentage point improvement of the for-sale inventory on Zillow. 

“As the recovery has progressed, inventory constraints have played a major role in rapidly pushing up home values in many areas, as increasing demand for homes ran headlong into limited supply,” said Zillow Chief Economist Dr. Stan Humphries in a statement. “It has always been just a matter of time before more supply came on the market to meet this demand, as homebuilders built more new homes and sellers entered the market to capitalize on recent robust appreciation in their own homes.”

The year-over-year inventory levels improved in June compared to January in 70 metros, and in the nation as a whole. Among the 30 largest metro areas Zillow covers, Phoenix (up 31.9 percentage points), San Diego (14.9 percentage points), and Minneapolis (13.5 percentage points) are among those with the highest degree of inventory improvement between January and June compared to a year ago.

However, inventory shortage worsened in 29 metro areas between the beginning of the year and early June, according to Zillow, including in 11 of the top 30 largest metros. 

Inventory constraints tightened the most in Las Vegas (worsening by 21.8 percentage points), Chicago (worsening by 12.3 points), and Washington, D.C. (worsening by 9.8 percentage points). 

“Inventory will likely remain below year-ago levels for a while yet, as builders ramp up capacity and sellers wait to squeeze every drop of equity from their home before listing,” said Humphries. “But a corner has been turned. Going forward, as this new supply makes its way to market, we expect the pace of home value appreciation to slow down from unsustainably high annual levels of 5 percent or above to more moderate levels closer to historic norms of 3 percent or 4 percent. “

Written by Alyssa Gerace

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