More traditional seasonal growth may be taking hold again in America’s housing inventory, but full recovery remains a distant prospect in this depleted market.
The number of homes for sale rose 3 percent from May to June — the second consecutive month of growth, according to the latest market report from Zillow Research.
Still, home inventory remained 42 percent lower than it was during the same month two years ago, a product of a market that has been unable to keep up with buyer demand in the pandemic-era landscape.
“Rapid home value growth continues to be a hallmark of this market, contributing to mounting housing affordability concerns and an overall challenging environment for buyers,” the Seattle-based listing giant’s report reads. “But conditions are nevertheless slowly changing, bringing more balance into the market that is likely to benefit both buyers and sellers.”
This time last year, the market was failing to grow as quickly as the typical seasonal pattern, which has usually involved something like a 4 percent rise in homes for sale from May to June. But in 2020, the number of homes for sale actually declined from May to June, followed by a summer of stunted growth and a winter of dramatic inventory depletion.
Home values reached record-high growth levels in June, up 2 percent from May’s levels and 15 percent higher year over year.
As home values have skyrocketed, rent hikes have also accelerated in June in markets across the country, the report says. Rents were up 7 percent from the same point last year, the biggest increase seen in at least six years.
The spike in rents is relatively recent, with a typical price hovering just under $1,700 per month for much of the pandemic before taking off in April of this year. By June, the typical rent nationwide had reached nearly $1,800 a month.
Zillow’s economists expect home values to continue to rise over the next year at a slightly more modest pace of 13 percent. This projection assumes the market will remain red-hot in the coming weeks before returning a bit closer to pre-pandemic dynamics sometime in the next seven to 12 months.
This more stable scenario would involve more home inventory continuing to come online, as it has in each of the past two months. This process could further reduce bidding wars and lead to a better environment for buyers.
“Even so, the market will need to see a lot more gains in inventory over a lot longer period before the addition of new supply helps to truly balance the market,” the report says.