Dive Brief:
- Realtor.com released its rankings of the 20 hottest real estate markets for May, and, unsurprisingly, California takes up half the spots, with Vallejo, CA at No. 1. In an unexpected move, Detroit jumped onto the list at No. 19, staging a bit of a comeback due to its affordability and economic growth.
- Realtor.com predicted that by the end of May, the median home list price will reach $250,000, up 2% from April and 9% higher year over year — marking the highest median price since the data company began compiling statistics in 2013.
- The residential real estate sector has not only seen record asking prices this month, but buyers are snatching homes off the market in a median of 65 days — the fastest pace since the post-crash housing recovery began, according to Realtor.com.
Dive Insight
Realtor.com Chief Economist Jonathan Smoke said pent-up demand and cheap mortgages are driving buyers to market, but the lack of inventory is causing home prices to skyrocket. Smoke also reported that even though May listings are up 550,000 from a year ago, inventory is 4% lower for that same period.
The real estate sits determined its "hot" list by studying the markets where properties are selling the fastest (median days on market) and where demand is strongest (listing views).
Zillow told a similar story this week of price surges and low inventory in its April Zillow Real Estate Market Report. The real estate data company found that home values rose 4.9% between April 2015 and April 2016, surpassing Zillow's expectations by 3%. On the inventory side, there were 3.4% fewer homes on the market overall, including 7.8% fewer starter homes.
The entry-level home supply has suffered the most in this environment of scarce inventory. In April, Zillow found that first quarter entry-level home prices were increasing at a faster clip than any other type of home in more than half of the biggest U.S. markets because of the 10% decrease in starter inventory. Whenever home prices rise, the real estate data company said, first-time homebuyers are usually the biggest losers, as the affordable entry-level home is more attractive to a wider range of buyers and comes with more competition.
Homebuilders have said the severe lack of inventory is due largely to regulatory fees pushing up the cost of building a home and keeping them from building more starter properties. According to the National Association of Home Builders, compliance with federal, state and local regulations has driven up the price of a home by 30% over the last five years and represents 24% of its cost.
Realtor.com's full list of the 20 hottest May markets includes:
- Vallejo, CA
- San Francisco
- Denver
- Santa Rosa, CA
- Stockton, CA
- Dallas
- Sacramento, CA
- San Diego
- San Jose, CA
- Columbus, OH
- Ann Arbor, MI
- Kennewick, WA
- Colorado Springs, CO
- Fort Wayne, IN
- Santa Cruz, CA
- Eureka, CA
- Boston
- Modesto, CA
- Detroit
- Raleigh, NC