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Inventory Improves in October, but Affordable Homes Still Scarce

appraisalThe nation's inventory of homes available for purchase saw a double-digit annual increase last month, but buyers looking for more affordably priced homes might find little reason to celebrate.

In its latest market update, Zillow reported that the number of for-sale homes nationwide rose 15.8 percent year-over-year in October.

While the increase may be welcome news for home shoppers in some of the country's most supply-starved metros, the number comes with a catch: The biggest gains were seen in the highest price tier of homes, leaving inventory in the most affordable price segment struggling to keep up.

"Depending on their finances, it's likely that individual buyers in the same market might be having completely different home buying experiences," said Zillow Chief Economist Dr. Stan Humphries. "Even as conditions improve for buyers overall, it remains a tough row to hoe for first-time buyers and lower-income buyers, especially compared to their more well-off contemporaries."

According to Zillow, the inventory of for-sale homes in the bottom price tier rose in 68.3 percent of the 353 markets the company tracked in the last year. That compares to 82.2 percent of markets seeing increases in the highest price tier.

The gap was greater in some of the country's biggest metros—like Denver, where there are almost four times as many homes available in the upper price tier ($357,900 or more locally) than there are in the lowest segment (less than $219,000).

The picture looks similar in cities like Dallas, Atlanta, Phoenix, and Nashville, which all have at least twice as many homes for sale in the top tier than in the bottom tier.

"We expect more demand to come from the lower end of the market in coming years as millennials overtake Generation X as the largest home-buying demographic," Humphries said. "As this happens, builders will be forced to build for these entry-level buyers, and inventory at the bottom tier should improve, however slowly."

Zillow also reported another decline in home value increases over the last 12 months, partly due to the rise in inventory. The company's Home Value Index rose 6.4 percent year-over-year in October to $177,500, the slowest annual increase in the past year.

On a monthly basis, the index ticked up 0.4 percent, also well below the level of increases recorded earlier this year.

That cooldown is bringing some measure of relief for homebuyers in the hottest markets, including some of California's more popular metros. In San Francisco, the number of low-price homes on the market rose by 39 percent in the past year, according to Zillow, while the number of high-price homes actually fell.

"While inventory was still tight there in October, the homes that were available spread evenly across the price spectrum," the company said.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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