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Falling inventory seen again in the US residential market

Inventory in the United States housing market continued to fall in September after a mild recovery earlier this year and is now down 6.4% year on year, the latest real estate data shows.

There are 102,112 fewer homes on the market in the US than there were last year at a time when buyer demand is picking up, according to the September real estate market report from Zillow.

It also show that the median home is worth $231,000, up 4.8% from this time last year and accelerating quarterly growth indicates that we may be reaching a turning point after a cooldown over the past several months while rent growth remains stable, up 2.2% year on year to $1,597.

Overall, inventory has fallen to its lowest level since at least 2013 with a dearth of new listings at the beginning of the home buying season. New monthly listings were 8.4% lower than the previous year in April and 10.6% lower in May and this has contributed to the current shortage.

In addition, recent data on existing home sales and new housing starts have shown signs of increased buyer demand, perhaps buoyed by historically low mortgage rates.

The market looks different at the bottom than the top. The inventory build up and subsequent reversal was especially severe among the bottom tier of homes, which are often targeted by first time and low income buyers.

Inventory growth among this group of homes reached 6.7% in October 2018, but fell 10.3% annually in September 2019. Buyers looking for homes in this price range are also less likely to see listings with a price cut. Some 12.7% of bottom tier homes had a price cut in September, compared to 15.7% of middle tier homes and 17.3% of top tier homes.

Annual home value growth slowed for the ninth consecutive month, falling to 4.8% year on year, the lowest since April 2013. However, the annualized rate of quarterly growth accelerated once again to 4.3%, further evidence that the market may be reaching a turning point after a sustained cooling-off period.

‘Housing appears to have renewed its place as a bright spot contributing to continued US economic growth. The return of accelerating quarterly price growth, rising sales numbers and increasing home builder confidence and activity all point to closing out 2019 on a healthy note, despite greater volatility over the course of this year,’ said Skylar Olsen, Zillow director of economic research.

‘A few markets have seen strong re-acceleration, led by Austin, and Seattle and Los Angeles are close to reversing the recent fall in home values that have been seen in many formerly hot West Coast markets. In contrast, Las Vegas, one of the more unpredictable markets in the country this decade, continues to put on the brakes. The story of the Bay Area metros losing steam after a frenzied period is well known, but it’s actually Las Vegas that has slowed the most dramatically since June,’ he added.

The index data shows that home values fell again in San Jose, down 10.7% year on year, and down 2.5% in San Francisco. In Indianapolis they were up 8.1%, in Austin up 7.6% and in Charlotte up 7.1%, the fastest growing large markets.

Rents rose 2.2% from a year ago to $1,597. The pace of annual rent growth has remained remarkably stable and has not dropped below 1.7% or risen above 2.4% at any point during the past 12 months.

Rents are growing the fastest in Las Vegas, up 6.4% year on year, and Phoenix up 6.2%, but were flat in Houston, the only one of the 35 biggest markets in the country where rents are not up from last year.