Even as Inventory Surges in May, First-Time Home Buyers Remain Challenged As Affordable Homes for Sale Fall

Inventory gains mostly concentrated in middle and upper home value tiers; Annual home value gains slow to lowest pace in a year, according to Zillow Real Estate Market Reports

- Inventory of all for-sale homes nationwide rose 11.8 percent year-over-year and 4.3 percent month-over-month in May, but fell among lower-tier homes in most large markets.

- The Zillow Home Value Index rose to $172,300, up 0.1 from April and 5.4 percent in May 2013.

- National rents fell slightly in May from April, down 0.1 percent to a Zillow Rent Index of $1,310.

SEATTLE -- After plunging throughout 2012 and for much of 2013, and rising only modestly through the beginning of this year, the inventory of all for-sale homesi nationwide spiked in May, jumping 11.8 percent year-over-year according to the May Zillow® Real Estate Market Reportsii.

But most of those gains in inventory were made among homes priced in the middle and top one-third of home values. The number of homes available for sale in the most affordable price bracket, those homes most sought by first-time homebuyers, fell year-over-year in 28 of the nation's largest metro areas analyzed by Zillowiii.

The total number of homes listed for sale on Zillow in May was up 4.3 percent over April, and has risen month-over-month in each of the past three months on a seasonally adjusted basis. Overall inventory of for-sale homes was up year-over-year in 506 (78 percent) of the more than 600 metro areas analyzed by Zillow. Large metros where inventory has increased the most include Las Vegas (up 51.5 percent year-over-year), Washington, DC (up 45.7 percent year-over-year) and Riverside, Calif. (up 42.7 percent year-over-year).

"It's good to see overall inventory rising. It's likely that many would-be sellers have decided to capitalize on recent home value gains, particularly as the pace slows, and list their home for sale now in order to move into a new home while mortgage interest rates remain low," said Zillow Chief Economist Dr. Stan Humphries. "But persistent inventory constraints at the low end of the market continue to make it a tough environment for first-time and lower-income homebuyers. Low inventory and high demand can lead to rapid price spikes, which make homes even more difficult to afford for many buyers. Hopefully the inventory gains we're seeing in the middle and upper tiers of the market will begin trickling down to the most affordable homes soon."

In addition to low numbers of affordable homes for sale, first-time and lower-income homebuyers armed with traditional financing are also competing with all-cash buyers at the lower end of the market. Zillow reported last weekiv that in 27 of the top 30 metros analyzed by Zillow, more than one third of all sales of the lowest-priced homes were made with cash. In three of the top 30 metros – Tampa,Detroit and Miami – more than 80 percent of all sales in the lowest price bracket were cash deals.

National home values in May were up 0.1 percent from April to a Zillow Home Value Index (ZHVI)v of $172,300, and have now risen for 28 consecutive months. Year-over-year, U.S. home values rose 5.4 percent in May, the slowest annual pace of appreciation in more than a year. For the 12-month period from May 2014 to May 2015, national home values are expected to rise another 2.9 percent to approximately $177,321, according to the Zillow Home Value Forecastvi.

National rents fell slightly in May from April, down 0.1 percent to a Zillow Rent Indexvii of $1,310. Year-over-year, national rents were up 2.3 percent in May.

	Zillow Home Value Index			Change in Inventory, by Price Tier
Metropolitan Area	May 2014 ZHVI	Month-Month % Change	Year-Year % Change	YoY % Change in For-Sale Inventory, Bottom Tier	YoY % Change in For-Sale Inventory, Middle Tier	YoY % Change in For-Sale Inventory, Top Tier
United States	$172,300	0.1%	5.4%	N/A	N/A	N/A
New York/Northern New Jersey	$372,700	0.2%	5.6%	1.5%	-1.3%	-0.2%
Los Angeles, CA	$530,000	1.6%	14.9%	6.0%	2.2%	-8.2%
Chicago, IL	$181,600	-0.3%	7.2%	-3.4%	3.2%	0.2%
Dallas-Fort Worth, TX	$144,600	0.4%	6.4%	-0.7%	-1.2%	2.0%
Philadelphia, PA	$194,700	-0.3%	2.4%	-1.1%	0.6%	0.5%
Houston, TX	$151,700	-1.5%	0.1%	N/A	N/A	N/A
Washington, DC	$352,800	0.2%	7.3%	2.0%	4.1%	-6.1%
Miami-Fort Lauderdale, FL	$195,500	1.0%	16.3%	1.9%	1.0%	-2.9%
Atlanta, GA	$145,400	1.3%	16.4%	-1.8%	4.5%	-2.8%
Boston, MA	$359,400	0.4%	7.6%	-0.8%	-0.7%	1.6%
San Francisco, CA	$683,900	1.4%	15.5%	8.4%	-1.2%	-7.2%
Detroit, MI	$110,100	0.9%	17.3%	-5.8%	2.1%	3.7%
Riverside, CA	$274,700	2.0%	21.9%	-0.4%	5.9%	-5.4%
Phoenix, AZ	$195,100	1.3%	8.1%	-1.1%	1.1%	0.1%
Seattle, WA	$332,000	1.4%	12.5%	5.3%	1.0%	-6.2%
Minneapolis-St Paul, MN	$201,200	-0.2%	6.6%	-3.3%	0.7%	2.6%
San Diego, CA	$464,600	1.3%	12.7%	-7.5%	2.1%	5.5%
St. Louis, MO	$131,100	-0.2%	-1.6%	-2.3%	2.1%	0.2%
Tampa, FL	$142,000	1.6%	15.0%	-2.9%	2.6%	0.3%
Baltimore, MD	$236,300	-0.3%	2.3%	-0.8%	2.9%	-2.1%
Denver, CO	$253,300	0.0%	8.3%	-1.0%	-4.5%	5.5%
Pittsburgh, PA	$120,900	-0.2%	6.7%	1.6%	-0.5%	-1.1%
Portland, OR	$271,800	0.7%	10.5%	1.3%	3.3%	-4.7%
Sacramento, CA	$316,700	0.7%	14.9%	-3.4%	1.7%	1.7%
San Antonio, TX	$148,800	-1.5%	-0.5%	N/A	N/A	N/A
Orlando, FL	$161,300	1.1%	15.0%	-0.8%	3.0%	-2.2%
Cincinnati, OH	$132,300	0.3%	3.0%	-0.6%	-0.2%	0.8%
Cleveland, OH	$118,500	0.3%	2.8%	0.0%	-2.2%	2.1%
Kansas City, MO	$141,100	-1.1%	-2.1%	-0.4%	-3.4%	3.8%
Las Vegas, NV	$180,800	2.6%	23.3%	N/A	N/A	N/A
San Jose, CA	$801,200	1.8%	15.1%	7.4%	-3.3%	-4.1%
Columbus, OH	$142,700	0.9%	9.5%	-0.8%	0.5%	0.3%
Charlotte, NC	$154,000	1.0%	7.0%	0.1%	2.5%	-2.7%
Indianapolis, IN	$133,000	-0.9%	1.9%	-0.9%	-1.5%	2.4%
Austin, TX	$217,400	-1.0%	5.0%	N/A	N/A	N/A