The Housing Market’s Inventory Problem

The share of available homes for sale in September fell after a slight recovery earlier this year, as Zillow reports there are 102,112 fewer homes on the market than there were last year—a 6.4% annual drop and the lowest level since 2013.

Home values, however, saw a 4.8% year-over-year increase and the average home is worth $231,000. 

"Housing appears to have renewed its place as a bright spot contributing to continued U.S. economic growth. The return of accelerating quarterly price growth, rising sales numbers and increasing home builder confidence and activity all point to closing out 2019 on a healthy note, despite greater volatility over the course of this year," said Zillow Director of Economic Research Skylar Olsen.

Zillow states that inventory grew year-over-year every month between September 2018 and February 2019. This trend reversed 44-consecutive months of inventory declines dating back to January 2015

New listings at the beginning of the homebuying season were 8.4% lower than April 2018 and 10.6% below May 2018 numbers.

Making matters worse, the Census Bureau revealed that housing starts in September were 9.4% below the revised August number of 1.38 million. The report states that 1.25 million homes were started in September. 

Housing completions were 9.7% below the prior month, as 1.13 million homes were completed in September compared to 1.26 million in August. The month-over-month drop in single-family housing completions for September was 8.6%. 

Zillow reports that the sector impacted the hardest are first-time and low-income borrowers. Inventory growth among this group reached 6.7% in October and fell 10.3% annually in September. Additionally, 12.7% of homes in the bottom-tier had a price cut in September, compared to 15.7% of middle-tier homes and 17.3% of top-tier homes.

San Jose, California, saw the largest fall for home values, as they fell 10.7% year-over-year. Indianapolis, Indiana, had the biggest increase at 8.1%.