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First-Time Buyers Face Lack of Inventory and Higher Prices

Entry-level homes are rising in value the fastest in most large U.S. housing markets, making it tough for first-time buyers to enter the market this spring- There are 5.9 percent fewer homes for sale in the U.S. than a year ago.- There are 10.4 percent fewer entry-level homes for sale in the U.S. than a year ago.- Low supply is driving up home prices among entry-level homes, which are often sought after by first-time buyers.- National home values rose 4.8 percent to $186,200, according to the first quarter Real Estate Market Reports. Rents rose 2.6 percent to $1,389.

SEATTLE, April 22, 2016 /PRNewswire/ -- Home values are rising the fastest among entry-level homes in more than half of the largest U.S. housing markets, according to first quarter Zillow® Real Estate Market Reports. [i] Rising home values in this segment of the market can be attributed to a lack of supply, with 10 percent fewer homes for sale this year compared to last.

The median value of entry-level homes, those in the bottom third [ii] of the market, rose the most over the past year in Denver, up 20 percent, followed by Portland and Dallas. There are 13 percent fewer entry-level homes available in Denver than there were a year ago. The number of entry-level homes available declined the most in Portland. There are 40 percent fewer entry-level homes available in Portland than there were a year ago.

The findings signal difficult times ahead for first-time homebuyers looking to enter the market. Going into home-shopping season this spring, buyers will find fewer homes in the bottom and middle of the market -- the homes most affordable for first-time buyers. The trend also highlights the different experiences buyers are having in the recovering housing market. Buyers looking for the most expensive homes will find slower price growth, a larger selection, and less competition this spring than entry-level buyers who are likely to face stiff competition, bidding wars, and very few homes to choose from.

"It's going to be a tough home-buying market this spring, especially for first-time buyers or even people looking to move up into a slightly more expensive home," said Zillow Chief Economist Dr. Svenja Gudell. "In order to stand out in a competitive market, buyers should get pre-approved for a loan, find an agent who has experience with bidding wars, and consider coming in at the asking price, so the seller knows they're serious."

In all of the largest U.S. housing markets, more than a third of the homes...