According to the latest Zillow Real Estate Market Report [1], housing inventory saw significant recovery for the second consecutive month in June, indicating that the market may be on the road to rebalancing after a long stint of being heavily in sellers' favor. However, inventory remains low, and demand is still strong, sending home value appreciation to new record highs for both monthly and annual growth.
The spike in demand for houses over the course of the pandemic sent inventory plummeting to a low of 33% below that for April of the prior year, ramping up competition for houses, and elevating prices. But inventory has begun to recover since then, with a 3.1% improvement in June, following a 3.9% increase in May, as overall inventory now stands at 29.2% below 2020 levels.
"Another month of rising housing inventory gives buyers some additional options, and a little more bargaining power," said Jeff Tucker [2], Senior Economist at Zillow. "While the level of inventory remains incredibly low by historic norms, it is now on a trajectory that should give buyers reason to hope for a cooldown in price growth this winter, consistent with normal seasonal trends."
Home value appreciation continues to break annual records for the second month in a row, notching 15% growth over last year—the highest in Zillow data reaching back through 1996. The Zillow Home Value Index (ZHVI) reached $293,349, up $38,341 compared to last June.
National home value growth continued to accelerate month over month, from a revised 1.8% in May to 2% in June, a new record high in the series' history. Growth in each of the past four months has been far above the pre-pandemic high of 1%, set in the summer of 2005.
Zillow economists forecast home values to increase by 13.2% by June 2022, a downward revision from the May forecast. June's forecast calls for 6.02 million home sales in 2021, a 6.6% increase over 2020 and a more bullish prediction than in May.
In terms of rent, the rise in rent nationwide maintained widespread momentum in June as the Zillow Observed Rent Index (ZORI) [3] rising 1.8% month over month, pushing the average U.S. rent to $1,799 per month. A strong recovery in the rental market over the past few months has led to 7.1% annual growth in June—the largest annual increase in the series' history reaching back to 2015, partly due to rebounding demand in pricey urban markets that were previously offering bargains in the midst of downtown office closures during the height of the pandemic. Even discounting a weakened market one year ago, rents have risen 5.8% since March.
The fastest monthly rent growth was seen in the Sun Belt region, in Las Vegas (3.6%); Tampa, Florida (3.4%); Austin, Texas (3.4%); and Phoenix, Arizona (3.3%). Sunny, relatively affordable areas have led home value appreciation over the past year, and are now seeing outstanding rent growth as well.