Key highlights from this report:
- A study showed which housing markets have had the most inventory growth.
- Western metros like San Jose, Seattle and Salt Lake City topped the list.
- But even in these “expanding” markets, homes are unaffordable for many.
Housing Markets With the Most Inventory Growth in 2019
Earlier this month, we looked at the ten housing markets that are expected to have the biggest year-over-year price gains in 2019. Today, we’ll shift gears and look at the inventory situation in some major cities.
In May, the real estate research team at Trulia published a report that showed (among other things) which U.S. housing markets have had the most inventory growth in recent months. Specifically, they looked at the one-year period from the first quarter of 2018 to the first quarter of 2019.
Note: Within the context of this article, “inventory” refers to the number of homes for sale in a certain area at a certain time.
According to that report, many of the housing markets with the biggest inventory gains are located in California:
“The 10 markets with the largest gains in inventory are also among the nation’s most-expensive housing markets, including the San Francisco Bay Area, Seattle, Los Angeles and San Diego. But even in these markets, dramatic increases in inventory – especially among starter homes – have yet to stem the tide of declining affordability.”
The table below shows the ten housing markets with the biggest gains in housing inventory from Q1 2018 to Q2 2019, according to this report.
|Metro Area||Inventory Growth from Q1 2018 – Q1 2019|
|San Jose, CA||55.40%|
|Salt Lake City, UT||37.30%|
|Colorado Springs, CO||30.40%|
|Los Angeles, CA||28.50%|
|San Francisco, CA||28.20%|
|San Diego, CA||25.80%|
Home Prices Slowed by Inventory Growth, Affordability Issues
As mentioned in the above quote, many of the housing markets that have seen the biggest inventory gains are also suffering from affordability issues. In some of these markets, a “typical” home buyer with a median income for the area can scarcely afford to buy a median-priced house.
That’s one reason why home prices are rising more slowly in these areas today, when compared to the past few years. Buyer demand has decreased due to a lack of affordability, and this has had an overall cooling effect on the real estate market.
The growth of inventory has also contributed to a slowdown in price growth in these housing markets. Many of these cities experienced rapid and significant home-price growth over the past few years, largely due to supply shortages. But that is now changing, as more and more homes go up for sale.
Take the San Jose real estate market, for example. Two or three years ago, home prices in San Jose, California were rising by double-digits year over year. Then they leveled off. And then they began to drop.
In May 2019, Zillow shared the following forecast for that housing market: “San Jose home values have declined -1.1% over the past year and Zillow predicts they will fall -5.1% within the next year.” Inventory growth has played key a role in that reversal.
Home prices are now rising more slowly in all ten of the housing markets listed above. An ongoing shift in supply-versus-demand has had a cooling effect in these and many other cities across the United States.
What’s up With Utah Lately?
Interestingly, the Utah housing markets on the top-ten list above are still outpacing the nation in terms of home-price growth. Inventory gains have had less of a cooling effect in those cities, it seems.
(See our related article for Salt Lake City, Ogden and Provo.)
The Ogden, Utah real estate market is a standout among the metro areas listed above. Home prices in and around that city have skyrocketed over the past year or so, and they continue to rise steadily as we approach the summer of 2019.
According to Zillow, the median home value in Ogden rose by nearly 20% over the past year. They are predicting a gain of around 11% over the next 12 months (through May 2020). Rising inventory is one of the factors contributing to slower price growth in this hot housing market.
The median home prices in Provo, Utah (another city on the top-ten list above) rose by about 15% over the past year. Salt Lake City posted an 11.5% increase over the past 12 months, by Zillow’s estimate.
All of these Utah housing markets are outperforming the national average in 2019, in terms of annual home-price gains. It will be interesting to see how inventory growth affects them down the road.
Tough Markets for First-Time Buyers?
You might think that a big increase in the number of homes for sale would be a boon for first-time buyers. After all, it gives buyers more options to choose from while easing competition at the same time. And that’s normally a positive.
But most of the real estate markets listed above are actually challenging for first-time buyers in 2019. This is due to the shortage of affordable “starter homes” — those that priced at the lower end of the spectrum.
“Despite gains in these less-expensive tiers, affordability concerns will persist this spring as starter and trade-up home prices continue to march upward,” the Trulia report stated.
Related: Starter homes scarce in some markets
Disclaimer: This article contains real estate forecasts and outlooks from third parties not associated with the Home Buying Institute. Housing predictions are the equivalent of an educated guess and should be treated as such.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author