Home values are appreciating faster than experts expected, rising almost five percent over the past year, according to the April Zillow Real Estate Market Reports, which found that there are 3.4 percent fewer homes for sale in the U.S. than there were 12 months ago. Zillow forecasted home values would grow two percent from April 2015 to April 2016, and outside housing experts said they expect slower growth in coming years. However, Zillow’s latest data show a different trend with home values currently appreciating at 4.9 percent–almost three percentage points faster than Zillow predicted a year ago–to a Zillow Home Value Index of $187,000.
Shrinking inventory is the story of the summer home shopping season for those looking to buy a home and entry-level homes have been hit the hardest; the number of entry-level homes for sale is down nearly eight percent over the past 12 months. Stiff competition and high demand, in addition to low inventory, stronger wage growth and low mortgage rates, are driving up home prices across the country, especially for entry-level homes, which is forcing many want-to-be-homeowners into bidding wars.
Markets with the tightest inventory have some of the fastest rising home values. Over the past two years, Portland has seen an almost 40 percent decrease in the number of homes for sale, with home values up 15 percent over the past 12 months. Similar patterns hold true markets like Dallas, Seattle and Denver, where inventory is down more than 20 percent and home value growth is in the double-digits. In addition to low inventory, home values are rising in response to a strong job market, higher-than-expected wage growth and persistently low mortgage rates.
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