While homeowners in the bottom price tier are still 17 percent shy of their pre-recession peak values, this is a distinct improvement from the 31 percent value loss they suffered when home values hit rock bottom in January 2012.

Returning value means many with lower-valued homes who had been in negative equity are now able to sell or refinance, boosting low-end inventory, which has been tight for the past few years.

Going into the home-buying season in 2015, homebuyers can expect to find more homes on the market and less competition from all-cash bidders. Metros with the biggest jump over last year in low-end inventory are Las Vegas, with 66.9 percent more low-end homes on the market in December 2014 than December 2013, Riverside, with 47.3 percent more and Washington, D.C. with 45.7 percent more.

Homeowners of lower-valued homes are emerging from negative equity and are able to sell just as many in the millennial generation prepare to buy homes, pushed into the housing market by rising rents and abysmal rental affordability. Zillow expects millennials to overtake Generation X as the top home-buying generation in 2015.

“In many ways, for the housing market to fully normalize, it has to start at the bottom,” says Zillow Chief Economist Dr. Stan Humphries. “More lower-end home sellers will help meet demand from entry-level buyers, and these sellers in turn will re-enter the market in search of a slightly pricier home, which will entice more middle- and upper-tier sellers to list their homes. As the economy gets stronger, we expect more young adults to strike out on their own, moving out of friends’ and parents’ homes. This will create strong demand in coming months, especially for less expensive homes.”

Rents continued to rise, and at the end of December the Zillow Rent Index had increased 3.3 percent year-over-year, to $1,345.

For more information, visit www.zillow.com.