Though tight inventory has continued to be a problem for first-time home buyers during the housing recovery, conditions improved in May.
According to Zillow's Real Estate Market Reports, the inventory of for-sale homes in the U.S. increased 11.8 percent year over year in May. Month over month, there was a 4.3 percent rise, representing the third consecutive monthly increase. These gains followed slumps that plagued 2012 and the majority of 2013, providing potential home buyers with the opportunity to shop for homes with less intense competition.
Zillow analyzes more than 600 metro areas, and 506 of these locations had year-over-year inventory growth in May. The Las Vegas market posted the most noticeable gain, climbing 51.5 percent compared to May 2013.
"It's good to see overall inventory rising," said Stan Humphries, Zillow's chief economist. "It's likely that many would-be sellers have decided to capitalize on recent home value gains, particularly as the pace slows, and list their home for sale now in order to move into a new home while mortgage interest rates remain low."
Affordable homes still have shrinking inventory
The one caveat to the inventory growth is that buyers might need jumbo loans to purchase the new properties on the market. More gains were seen in the middle and top third of home values. Meanwhile, there were declines for the lowest-priced homes in 28 of the nation's largest metro areas tracked by Zillow.
Humphries noted that this presents a challenge for first-time buyers, as they tend to shop in the less expensive market. Furthermore, those properties that are available are are selling at higher prices, as unyielding demand is driving home values up. The chief economist said he hopes the inventory growth seen for more expensive properties will soon be evident for affordable homes.
Although all-cash buyers still represent stiff competition for mortgage-dependent buyers, their presence is waning in the housing market, as Zillow also recently reported that all-cash sales dropped during the first quarter.
New housing provides inventory aid
The U.S. Census Bureau released its May new residential construction report, which showed that newly built homes could have been a catalyst for the inventory gains noted by Zillow. Privately owned housing completions rose 6.8 percent from April to May, increasing to a seasonally adjusted annual rate of 897,000 units. There was a 24.8 percent gain compared to May 2013. Completions in the single-family housing market went up 2.1 percent month over month to a rate of 618,000 units.
Despite the rise in completed homes, there could be fewer builders breaking ground in the coming months. Declines were posted for housing starts and the number of building permits issued. These decreases were seen in the privately owned and single-family markets, but they were all single-digit drops.
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