Low housing inventory kept competition stiff in July and set up a strong sellers’ market in most parts of the country.
Home value appreciation was rising at ia rapid pace amidst the coronavirus economic crisis, up 4.5% year over year, according to the July Zillow Real Estate Market Report. The July year-over-year growth took Zillow's Home Value Index to $353,527.
But supply remained unable to meet the demands of the red-hot housing market. Inventory plummeted 28.4% year over year with 409,029 homes on the market as of Aug. 15. Inventory also decreased in each of the 50 largest metros – down the most in Riverside, Calif. (-46.5%), Baltimore (-43.8%) and Hartford, Conn. (-43.1%).
Zillow Economist Jeff Tucker said this stands in stark contrast to the Great Recession, when home values were down due to excess supply and distressed sales.
"This spring's housing soft patch is receding in the rearview mirror as we get a clear picture of robust demand meeting remarkably low supply," Tucker said. "Record-low mortgage rates and a record-high number of people in their early 30s are combining to fuel first-time buyer demand. Builders, acting on unprecedented confidence, are racing to meet demand, but supply remains well behind what's needed."
The report also showed that homes sold last month typically went under contract after only 16 days, two days quicker than the previous monthly low in Zillow data that dates back to January 2018.
Zillow predicted that home-value appreciation would slow to 3.6% over the next 12 months from July's 4.5% year-over-year growth.
"While the housing market has so far sailed through the headwind of high unemployment, risks remain," Tucker said. "A slow economic recovery that keeps millions of Americans looking for work could dampen home buying demand and may even lead to a wave of foreclosures when forbearance expires. This pessimistic possible outcome for 2021 has caused Zillow's price forecast to shade down a bit."
COVID-19 continues to slow down rent growth
Unlike the steady recovery of the for-sale market from the coronavirus recession, the residential rental market continued to lag as annual rent growth slowed by 1.2% to a typical rent of $1,749.
Rents dropped from last year in nine of the top 50 markets. Three of the most expensive markets saw the biggest declines, with the greater New York metro posting a 2.6% year-over-year drop, San Francisco down by 2.5%, and San Jose down by 2.2% in July.