Zillow: Shrinking inventory drives unexpected 5% gain in home prices

Dive Brief:

According to April’s Zillow Real Estate Market Report, home values rose 4.9% from April 2015 to a Zillow Home Value Index of $187,000, nearly 3% higher than the real estate data company had predicted.
There were 3.4% fewer homes for sale overall in April 2016 than in April 2015, with 7.8% fewer starter homes on the market.
Demand, low inventory, strong job markets, accelerated wage growth and low mortgage rates have all contributed to rising home values in the hottest markets, according to Zillow.

Dive Insight:

Zillow reported a direct relationship between low inventory and rising prices. The site offered Portland’s inventory plunge of 40%, along with the subsequent 15% rise in home values over the last two years, as an example. Zillow also said that Dallas, Seattle and Denver have seen double-digit home value increases in the last two years.

The best chance of finding a home, Zillow said, lies with those looking for a condominium or luxury home, as those markets have neared positive growth. For the more popular categories of single-family homes, homebuilders would need to double production to meet demand, according to Zillow Chief Economist Svenja Gudell. In a release, Gudell said "the struggle will continue" for buyers trying to find available properties. However, builders point to increasing regulations as a major inhibitor to ramping up construction.

Despite low inventory, the Commerce Department reported this week that new single-family home sales increased surged 16.6% between March and April to an annual rate of 619,000, beating April 2015's new-home-sales rate by 23.8% and delivering a median sales figure of $321,100.

Available inventory, or lack thereof, has been the real estate story in many of the busiest housing markets. However, the concern is not only with housing inventory, but with lot inventory. The National Association of Home Builders reported this week that 64% of surveyed builders reported lot supplies in their areas were low or very low — the highest percentage since tracking began in 1997.