The median U.S. home value was up 5.5% year over year in September to $189,400, according to real estate listing website Zillow’s September Real Estate Market Report.
September’s growth represents the fastest pace of home value appreciation in two years. Portland, OR, Dallas and Seattle posted the biggest gains of the country’s 35 largest metros.
Meanwhile, inventory has fallen 6% from September 2015 to September 2016.
Inventory conditions nationwide remain tight, particularly in the starter and trade-up categories, pushing prices up and making it difficult for first-time buyers to enter the market. In its third quarter 2016 Inventory and Price Watch, real estate website Trulia noted that U.S. housing stock contracted for the fifth-consecutive quarter to be down 6.7% year over year.
Existing-home sales are up, however, rising 3.2% between August and September to a seasonally adjusted 5.47 million, which is 0.6% ahead of the same period a year ago. And tight inventory conditions are pushing those prices up. The National Association of Realtors reported that the median existing home price was up 5.6% in September 2016 from a year ago, marking the 55th-consecutive month of price increases.
New construction is looking up, too. Single-family new construction stood out in September’s otherwise disappointing housing starts report from the Commerce Department. The category posted a rate of 783,000 starts in September, up 8.1% from the previous month and 5.4% from a year ago.
September’s existing-home sales were driven by first-time buyers, according to the NAR. A report earlier this month from Realtor.com found that individuals between the ages of 25 and 34 — the older half of the millennial generation — made up one-third of homebuyers in September.
Tight inventory, rising prices and an increase in first-time buyers has builders looking up. The National Association of Home Builders/Wells Fargo Housing Market Index was at its second-highest point this year in September, driven by low mortgage rates and high future sales expectations as residential builders are more confident for activity ahead.