Us home supply continues to shrink

Charlotte, North Carolina, where supply has fallen by the most in the past year Photo: Carrotflower Productisons International

The supply of homes for sale in the USA is continuing to shrink, leaving buyers with fewer choices.

New figures from Zillow show that there were fewer homes for sale in June than there were a year ago, increasing competition among potential buyers. Inventory of all homes for sale nationwide on the site edged up 2.1 per cent month-on-month, but fell 6.5 percent year-over-year. Supply fell year-over-year in 19 of the nation's 35 largest metro areas covered by Zillow, led by Charlotte, San Antonio and San Diego, areas where houses tend to sell above asking price due to the high competition.

Indeed, the lack of supply in the face of strong demand has helped to push up home values in America, with home values nationwide up 3.3 per cent year-over-year in June 2015. Prices are expected to rise another 2.4 per cent in the next 12 months.

While this is good news for sellers, the shrinking supply is putting the squeeze on first-time buyers. Indeed, most of the declines in supply were among the lowest-valued homes sought by first-time homebuyers, according to Zillow. In the lowest-priced third of homes for sale, the inventory of homes on the market fell year-over-year in 28 of the nation's 35 largest metro areas. By comparison, among the highest-priced homes, inventory fell year-over-year in only 10 of the nation's largest metro areas.

Low mortgage rates, though, are helping to make homeownership still affordable for those can secure financing.

"Finding a house is the last hurdle for many buyers who have saved a down payment and gotten pre-approved for a mortgage," comments Zillow Chief Economist Stan Humphries. "But low inventory levels like those we're seeing across the country can bring the home-buying process to a screeching halt. In many markets, there just isn't a lot to choose from."

As home values continue to rise, buyers are faced with more challenges in a tighter market, especially in hot markets like Denver, which saw the highest home value appreciation from last year, surpassing even San Jose and San Francisco.

Rents have also continued to rise in the second quarter, up 4.3 per cent from this time last year to a Zillow index reading of $1,369.