First-time home buyers can expect an easier home shopping experience this spring, as market conditions shift in their favor, welcome news for buyers who have struggled to break into the market, according to a new report from online real estate company Zillow.
Entry-level home values are growing at their slowest pace since mid-2016, giving first-time home shoppers a little more breathing room during the home search process, according to RealEstate.com's Entry-Level Market Report.
At the same time, inventory is showing consistent positive growth, which means that buyers will have more choices and likely face less competition when looking for the right home.
For the past several years as the market recovered from the housing crash, rapid home value appreciation and falling inventory created steep competition and expensive buying environment, keeping many first-time buyers on the sidelines.
Record-high rents and not being able to use profits from a previous home sale made coming up with a down payment - the biggest hurdle for renters wanting to become homeowners - even harder for new buyers.
The typical entry-level home is worth $130,200, up 9.2 percent from a year ago. This is the slowest pace of annual appreciation on record since June 2016.
Last February, entry-level homes were gaining value at a 12.5 percent annual pace. Forty-two of the 50 largest U.S. metros saw slower entry-level home value appreciation compared with a year ago.
Jacksonville and Tampa, Florida saw the biggest declines in appreciation, with each slowing by more than 16 percentage points from breakneck paces of more than 25 percent a year earlier, but both markets are still appreciating faster than the national average.
The number of entry-level homes on the market is also on the rise, which may be contributing to the slowing pace of appreciation.
Entry-level inventory rose 4.1 percent over the past year, marking the seventh straight month of growing inventory - a sign that this is a real shift in the market, rather than a temporary change. Prior to this growth, the number of entry-level homes for sale had fallen on a year-over-year basis for nearly four years.
Salt Lake City and San Jose saw the biggest increases in entry-level inventory, up 67.2 percent and 60.1 percent, respectively.
For first-time buyers trying to understand what they can afford, RealEstate.com's All-In Monthly Price allows them to search based on their monthly housing budget and down payment savings.
Zillow Group designed the RealEstate.com search experience to give first-time buyers more transparency and a better understanding throughout the home search process.
Find out more at www.zillow.com.