A new report from Zillow says home values are rising fastest in the entry-level segment in more than half of the largest U.S. housing markets. This, according to first-quarter Zillow® Real Estate Market Reports, means that in these markets, there are 10% fewer homes for sale this year compared to last.

The median value of entry-level homes, those in the bottom third of the market, rose the most over the past year in Denver, up 20%, followed by Portland and Dallas. There are 13% 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% 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 available for sale are in the most expensive segment -- in the top third of the overall housing stock in the market. In nine markets, top-tier homes make up more than half of the inventory.

The most expensive homes on the market are more likely to have a price cut, a signal that there's less demand for top-tier homes. The share of top-tier listings with a price cut has increased 1.6 percentage points over the past year.