For-Sale Home Inventory Falls to New Low

Zillow reports that the inventory of for-sale homes fell 7.5% year-over-year to its lowest level since 2013. 

Inventory is down annually in 31 of the 35 largest U.S. housing markets. The only exceptions are San Antonio (8.1%); Atlanta (1.8%); and Chicago (0.6%).  

Seattle saw inventory shrink 28.5% in 2019. San Diego was close behind at 23% and Sacramento, California, followed at 21.7%. 

Zillow says that as inventory continues to fall, the slowdown in home-value growth may be coming to an end as demand is putting price pressure on the small number of available homes on the market. 

The rate of annual home-value growth slowed in November 2019—marking 20 consecutive months where growth stalled. However, the gap between November and December 2019 is the smallest one-month drop during the 20-month stretch. 

Home values grew 3.7% to $244,054—down slightly from 3.8% year-over-year growth for the prior month. 

Phoenix had the highest home-value growth at 6.5% in 2019. Columbus, Ohio, and Charlotte, North Carolina, were second at 5.9%. Home values fell in two markets: San Jose, California (6.4%) and San Francisco (1%). 

"The end of 2019 looks a whole lot different than we might have expected at the beginning of the year," said Skylar Olsen, Director of Economic Research at Zillow. "A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it's set to reverse back to accelerating growth right as we head into home shopping season with demand outpacing supply."

While home values are rising, inventory continues to shrink. 

Realtor.com’s Housing Forecast found there have been “sustained levels” of underbuilding since 2012 and the market is short 3.84 million homes to meet demand. The forecast projects it would take home builders four to five years to close the gap.  

Between 2009-2011 just 1.35 million single-family homes were built, however, 2.28 million new households were formed.

Builders began to increase output between 2012-2019, as single-family starts per 1,000 households grew from 4.6 in 2012 to 7.3 in 2019. The eight-year average improved to 6.2 starts per 1,000 households—below the two-decade average.