The 10% year-over-year drop in inventory is driving home prices up
The median U.S. home value has risen 6.5 percent year-over-year to an all-time high of $206,300 — a number that is only expected to increase in 2018, thanks to double-digit decreases in inventory.
According to Zillow’s December Real Estate Market Report, nationwide inventory has fallen 10 percent year-over-year — the third consecutive year of annual declines. In high-priced and high-demand markets such as San Jose and Las Vegas, for-sale inventory has fallen 41 percent and 27 percent year-over-year, respectively.
Simultaneously, in those same markets, home price appreciation has skyrocketed. Median home values in San Jose climbed 21 percent year-over-year to $1,171,800, while Las Vegas home values grew 14 percent to $246,700. Seattle rounded out the top three with a 12.5-percent hike to $468,000.
“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 in a statement.
“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.”
“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,” he added. “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.”
Buyers aren’t the only ones grappling with rising prices — renters are dealing with a 2.6 percent year-over-year rise in median rents ($1,439), the highest rate of appreciation since June 2016.
Sacramento knocked Seattle out of the top spot for rent appreciation with an 8 percent year-over-year increase to $1,838. Median rent in Riverside rose 6 percent year-over-year ($1,853), and in Seattle, rents rose 5 percent ($2,203)
Article by Marian McPherson