Inventory of for-sale homes in the US hit at least a seven-year at the end of 2019, according to the December Zillow Real Estate Market Report.
Zillow forecasted that the 7.5% year-over-year drop in inventory is bound to get worse. With low mortgage rates and steady consumer confidence, demand continued to rise, and eager buyers are snatching up the few homes left in the market.
The number of homes for sale in 31 of the 35 largest US housing markets went down, with Seattle (-28.5%), San Diego (-23%), and Sacramento (-21.7%) posting the biggest declines in 2019. San Antonio (+8.1%), Detroit (+7.6%), Atlanta (+1.8%), and Chicago (+0.6%) were the only outliers.
As inventory shrank, the rate of annual home value grew 3.7% last year to $244,054. US home values increased the most in Phoenix (+6.5%), Columbus (+5.9%), and Charlotte (+5.9%), while San Jose (-6.4%) and San Francisco (-1%) saw declines.
"The end of 2019 looks a whole lot different than we might have expected at the beginning of the year," said Skylar Olsen, director of economic research at Zillow. "A year ago, a combination of a government shutdown, stock market slump, and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it's set to reverse back to accelerating growth right as we head into home shopping season with demand outpacing supply."
The typical rent in the US also jumped, up 2.6% to $1,600. Two of the hottest markets, Phoenix (+8.1%) and Charlotte (+5.3%), reported the highest rent increases. Columbus (-2.5%) was the only market to experience cuts in rents last year.
Mortgage rates listed on Zillow dipped to 3.66% in December after starting the month at 3.72%. On Dec. 16, rates reached their monthly low at 3.6%, then peaked at 3.75% on Dec. 25.