Zillow today released its October Real Estate Market Report, which revealed the national median-priced home ($203,400) is $12,500 more valuable than it was in 2016, due to continuing inventory issues that have pushed up home values at breakneck speed.
According to the report, this is the 18th consecutive month where home values have risen by at least six percent year-over-year, double the annual rate of appreciation seen in a “normal” market.
“We are in the midst of an inventory crisis that shows no signs of waning, impacting potential buyers all across the country,” said Zillow Chief Economist Dr. Svenja Gudell in a statement. “Home values are growing at a historically fast pace, and those potential buyers want to get in the market while they still can.”
San Jose, Calif. led the way in home value growth, with homes appreciating by 12.3 percent year-over-year to $1,076,400. Seattle and Las Vegas rounded out the top three with home values in those metros appreciating by 11.7 and 11.2 percent, respectively.
The home value growth in these areas is directly tied to the ongoing inventory shortage seen across the country. Overall, there is 11.7 percent fewer homes for sale in the U.S. than in October 2016, and inventory in areas with the highest median home prices, such as San Jose, San Francisco and San Diego, has withered down to depressing levels.
In San Jose, inventory has dropped by a whopping 60.4 percent, and San Francisco and San Diego have seen their inventory go down by a third.
Although the increase in home values is great for sellers looking to garner higher sales prices and build equity in their homes, it spells bad news for buyers who have been struggling to find an affordable home.
Starter homes that first-time buyers usually vie for have experienced the highest appreciation rates, with homes in the lowest price tier growing in value by 8.4 percent year-over-year. Meanwhile, values for homes in the top price tier have only appreciated by 3.7 percent.
“But with homes gaining so much value in just one year, buyers — especially first-time buyers — have to set aside more and more money for a down payment just to keep up with them,” Gudell added. “Unfortunately, there’s just not enough homes for sale, and demand will continue to drive prices higher until we reach a better balance between supply and demand.”