Welcome News With a Caveat

In Q1 2019, the share of for-sale homes in the U.S. did not post an annual decline for the first time since Q3 2016.

Starters homes had the fastest annual growth rate in more than 6 years. By contrast, high-end home supply did drop 4.5 percent. On the West Coast, inventory increased in all three home categories year-over-year. San Jose, Calif. had the most growth with 55.4 percent additional listings, and Trulia's analysis finds that this is due in part to "exhaustion of demand," with homes staying on the market longer, and fewer home shoppers buying what's available.

The growing number of lower-priced homes on the market may be construed as welcome news for many first-time home buyers entering the market this spring. But a closer look at local inventory trends reveals that the markets with the greatest growth in inventory are also markets where prices have rapidly risen to notoriously high levels and supply has been severely constrained over the past few years. This rapid appreciation has caused affordability to deteriorate more quickly in these areas, and the nascent rise in inventory may actually reflect an exhaustion of demand in these communities, more than it reflects a greater number of sellers listing their homes.

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