Takeaways:
- Inventory declines are especially acute in the lowest-priced third of homes listed.
- These are challenging numbers to be reporting in a climate of rapidly rising rents, which continue to outpace home appreciation.
- Millennials, who have been reticent to buy homes since the financial crisis and Great Recession, are now expressing interest, but there aren’t enough lower-priced homes to accommodate in many U.S. markets.
Housing inventory is down for the fifth straight month, which increases competition and raises a challenging hurdle for first-time homebuyers.
Zillow said the number of homes listed for sale on Zillow in June was down 6.5 percent from the same period a year ago, but up 2.1 percent from the previous month.
Inventory declines are especially acute in the lowest-priced third of homes listed, which fell in 28 of the nation’s 35 largest metros, Zillow said. Inventory for the highest-priced homes, meanwhile, fell by only 10 percent.
Charlotte, North Carolina (-39.7 percent), San Antonio, Texas (-31.3 percent) and San Diego, California (-30 percent) saw the biggest decreases in the overall supply of for-sale homes.
The inventory decline in the lower tier-priced homes was even more severe. This segment of the market was down 63.9 percent in San Antonio, 49.4 percent in San Diego and 48.7 percent in Charlotte.
In Dallas-Fort Worth, inventory for the lowest-priced third of homes dropped 42 percent compared to June 2014. Miami-Fort Lauderdale and the Phoenix metro areas saw similar declines — 42.2 percent and 42.3 percent, respectively.
These are challenging numbers to be reporting in a climate of rapidly rising rents, which continue to outpace home appreciation.
Rising rents, coupled with low mortgage interest rates, have combined to make homeownership more attractive. Millennials, who have been reticent to buy homes since the financial crisis and Great Recession, are now expressing interest.
Unfortunately, we don’t have enough lower-priced homes for them to buy in many U.S. markets. Negative equity, damaged balance sheets from the recession and stagnant wage growth might be holding back some homeowners from listing their homes for sale.
Low inventory drove double-digit price increases in some metros in the second quarter (Denver, Dallas, San Jose and San Francisco), which will further strain first-time homebuyers as homes in those areas become less affordable.
To be sure, housing remains affordable and inventory plentiful in some pockets of the country. But for many, low numbers of listings are cause for concern. The persistent low inventory could hold back some would-be buyers from getting the house of their dreams.
Brian McCary is a vice president of sales at Guardian Mortgage Company’s Plano location. You can learn more about him on LinkedIn.