US housing inventory jump is set to be a welcome relief for prospective buyers

Housing inventory saw significant recovery for the second straight month in June, according to the latest Zillow Real Estate Market Report.

The increased housing inventory indicated the market may be on the road to rebalancing after a long stint of being heavily in sellers’ favour.

But demand is still strong, sending home value appreciation to new record highs for both monthly and annual growth, according to Zillow.

Intense demand for houses over the course of the pandemic sent inventory plummeting to a low of 33 per cent 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 per cent improvement in June, following a 3.9 per cent increase in May.

Inventory now stands at 29.2 per cent below 2020 levels. 

Zillow senior economist Jeff Tucker said another month of rising inventory allowed buyers to consider additional options and could even provide a “little more bargaining power”.

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 cool down in price growth this winter, consistent with normal seasonal trends,” Mr Tucker said.  

Zillow has reported inventory growth still has a long way to go before it balances out the market. The relentless demand pushed appreciation into new territory again in June.

Home value appreciation broke annual records for the second month in a row, notching 15 per cent 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. 

Annual appreciation among the top 50 US metropolitan areas ranged from New Orleans’ quite healthy 10.1 per cent to Austin’s astronomical 36.8 per cent, sitting ahead of Phoenix’s 26.6 per cent.

National home value growth continued to accelerate month over month from a revised 1.8 per cent in May to 2 per cent 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 per cent, set in the summer of 2005.

Monthly home value growth among major metros ranged from 1.1 per cent in New Orleans to an eye-watering 5.1 per cent in Austin, ahead of San Jose at 3.7 per cent and Las Vegas at 3.6 per cent.

Monthly growth accelerated in 48 of the top 50 metros and basically held steady in Pittsburgh and Memphis.

Zillow economists forecast home values will increase by 13.2 per cent 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 per cent increase over 2020 and a more bullish prediction than in May. 

Rent growth maintained widespread momentum in June as the Zillow Observed Rent Index (ZORI) rose 1.8 per cent month over the month, pushing typical US rents to $1799.

A strong recovery in the rental market over the past few months has led to 7.1 per cent annual growth in June – the largest annual increase in the series’ history reaching back to 2015.

This is partly due to rebounding demand in pricey urban markets that were previously offering bargains in the midst of downtown office closures.

Even discounting a weakened market one year ago, rents have risen 5.8 per cent since March, the highest quarterly growth in Zillow’s data. 

The fastest monthly rent growth was seen in Sun Belt standouts of Las Vegas (3.6 per cent), Tampa (3.4 per cent), Austin (3.4 per cent) and Phoenix (3.3 per cent).

Sunny and relatively affordable areas have led home value appreciation over the past year, and are now seeing outstanding rent growth as well. 

Mortgage rates listed by third-party lenders on Zillow began in June at a monthly high of 2.83 per cent and fell to a near all-time low rate of 2.67 per cent on June 11, before finishing the month at 2.72 per cent.

Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Group Mortgages website by third-party lenders and reflect recent changes in the market.

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