Photo: Robert Clark
Inventory may be finally growing in some of the hottest US housing markets, but home prices remain on an upward trajectory, according to a new report by the listing site Zillow.
“In yet another sign that the housing market is cooling, we’re finally starting to see inventory return after several years of annual declines,” said Aaron Terrazas, Zillow senior economist, in a statement.
Compared to last year, there were 3 percent more homes for sale in October nationwide. Inventory had fallen annually for 44 straight months before posting positive growth.
In October 2017, inventory fell at a 10.2 percent annual pace. And a slight uptick in September (0.1 percent) led to stronger growth in October — a “possible sign of future increases in available inventory,” reads the report.
“The combination of tight supply and strong demand have pushed up home values in recent years, but markets always ebb and flow and there is no doubt that the tides that have buoyed sellers are shifting,” says Terrazas.
Many of the country’s hottest markets saw some of the biggest gains in inventory in October.
San Jose, California, saw the biggest annual increase in inventory — adding about 1,500 homes to the market, increasing inventory by 93.1 percent year-over-year. San Jose’s for sale inventory reached its lowest level on record last year.
Three other pricey housing West Coast housing markets — San Diego, San Francisco, and Seattle — also recorded big gains in the number of homes for sale in October.
“While there are more homes for sale, rising mortgage rates are quickly eating into what they can afford to pay,” says Terrazas.
Meanwhile, the median home value nationwide rose 7.7 percent year-over-year to $221,500 in October.
San Jose and Las Vegas saw the strongest annual price appreciation in October at 17.9 percent and 14.7 percent, respectively. These two housing markets have led the nation’s largest metros in price growth for the last 12 months.
About half of the nation’s 35 largest metro areas recorded slower home price growth in October 2018 compared to October 2017.
Rising home prices have proven to be challenging for many homebuyers, who have opted to stay in the rental market. But rising prices in the for-sale market could have a boomerang effect on the rental market.
“First-time buyers have benefited from flat or falling rents over the past year, making it somewhat easier to save for a down payment, but the decline in rents could be short-lived if higher buying costs push some people back toward the rental market,” says Terrazas.