House prices continue to rise in the US, as supply increases for first time in many years
House prices in the United States increased by 7.5% to $225,300 in the 12 months to January 2019 while rents have increased by 2.1% to $1,468, the latest index shows.
The data from real estate firm Zillow also shows that there are more homes for sale with inventory rising on an annual basis in four of the past five months after falling for almost four years in a row.
Year on year inventory increased by 1.2%, meaning that there were 19,455 more homes on the market for sale than in January 2018. The biggest increase was in West Coast markets.
While, this was the first national inventory gain in January since at least 2014, the data shows that the slow pace of growth has thus far done little to reverse the long contraction in inventory that took place from January 2015 to August 2018. In July 2017, inventory was falling at its fastest pace since 2014 at 12.8% year on year.
Inventory has increased the most in five West Coast markets that were recently among the nation’s hottest, giving home shoppers more options and ever-so-slowly tilting the market toward buyers. On an annual basis, inventory grew 42.9% in San Jose, 36.9% in Seattle, 31.9% in San Diego, 29.1% in Los Angeles and 25% in San Francisco.
While the number of homes for sale grew in about three quarters of the country’s largest housing markets, a few East Coast markets saw big drops. Inventory in Washington DC, Baltimore and Pittsburgh all fell at least 10%.
Indeed, inventory fell 19.9% in Washington DC, the third straight month of annual declines of at least 14% following Amazon’s announcement in November that it would site a new headquarters there.
‘For four years, it felt like home buyers couldn’t catch a break as for-sale inventory became tighter and tighter with each passing month,’ said Zillow senior economist Aaron Terrazas.
‘But during the second half of 2018, something shifted. Home buyers aren’t out of the woods yet, but there is a glimmer of light on the horizon. The number of homes on the market is hesitantly inching higher, now approaching the highest level in a year and a half. In the priciest markets, the jump has been even more definitive,’ he pointed out.
‘Buyers should not mistake a few more options for a sudden bounty. With home values still increasing at a steady clip, it’s clear that demand still outstrips supply, and with mortgage rates down from recent highs, the first quarter of 2019 is shaping up to be more competitive than the lull we saw as 2018 came to a close,’ he added.
He also pointed out that home value growth has remained at a steady pace in the seven percent range over the past two years though the national numbers obscure substantial differences across the country. Indianapolis and Atlanta experienced the biggest jumps over the past year, with home values increasing by more than 12% in both metros.
Rents grew on an annual basis for the third straight month following two months of annual declines, up 2.1% over a year ago to a median of $1,468. This was the largest increase in annual rents since May 2018.
Rents increased or remained flat in all major metros with Orlando, up 7.4%, experiencing the biggest increase. On the other end of the spectrum, rents were flat in Portland over the past year.