Zillow: Housing Market ‘Slowing;’ Calif. Homeowners Staying Put
Zillow Inc., Seattle, said the housing market is slowing down, with home values seeing the first negative monthly change since the market began its recovery nearly four years ago.
The company’s July Real Estate Market Report said nationally, home value appreciation began leveling off after its rapid pace in the early years of the recovery. Homes lost 0.1 percent of their value in July, falling to a Zillow Home Value Index of $179,900. Homes appreciated by 3 percent on an annual basis, down from 3.4 percent in June.
Of the 517 metros covered by Zillow, 204 saw a slowdown, including major metros such as Washington, D.C. and Cincinnati, where home values declined month-over-month in July. Denver, Dallas, San Jose and San Francisco, which had double-digit annual home value growth in July, saw their monthly appreciation rates ease from June.
Zillow Chief Economist Svenja Gudell said the slowing appreciation is a sign that the market is returning to normal; economists have expected to see growth flattening out as the recovery continues.
“This slight dip in home values is a sign of the times,” Gudell said. “Many people didn’t think it was happening, but it is: we’re going negative. We’ve been expecting to see a monthly decline as markets return to normal. However, this is not like the bubble bust. We’re not going to see 10 percent declines. The market is leveling off, and it’s good news, particularly for buyers, because it will ease some of the competitive pressure.”
The report said slowing home values could provide more opportunities for hopeful buyers who have been waiting on the sidelines for the market to cool off. “More homes may be coming online as homeowners who have been watching strong home value growth decide to list their houses as appreciation slows and smaller gains are expected,” the report said. “This could help ease the constrained inventory the market has been facing for the past several months.”
Zillow also reported rents continue to grow at a rapid pace, up 4.2 percent from last July to $1,376. “With no sign of rents slowing down and the potential for more homes for sale, conditions may be right for buyers to enter the market,” the report said.
In a separate report, the California Association of Realtors said even with rising home prices over the past few years, many homeowners who have considered selling are deciding not to because they are caught in an affordability squeeze compounded by a lack of inventory.
The CAR 2015 Survey of California Homeowners reported more than one-third (35 percent) of homeowners have considered selling their home in the past year; of that share, two-thirds (64 percent) are reluctant to sell because they are finding they can’t afford the home they really want.
The survey also reported more than half (59 percent) of homeowners have not seriously considered selling their home in the past year, the majority saying their current home will be their retirement residence. For those who have been in their home 15 years or more, that figure rises to 70 percent who indicated they have not considered selling because their current residence will be their retirement home.
But for others (44 percent), the survey said the affordability crunch, higher property taxes and home prices are keeping them in their current home.
CAR said in first-quarter 2012, when housing in California was at its most affordable, a median income of $56,324 was needed to purchase a median-priced home. In second-quarter 2015, that figure jumped to $96,160, with 99 percent of that required income increase attributable to home price increases.
CAR said 61 percent of all homeowners survey could be prompted to sell if they got the price they want for their home; 56 percent would sell if they had a gain in their home value; and 53 percent would sell if a better or equivalent house was available.
The survey said 56 percent of homeowners who have considered selling said they desire a larger home; 48 percent would sell because they desire a smaller home. Those who have owned their home less than 15 years were nearly twice as likely (66 percent) to consider selling due to their desire for a larger home than those who have owned their home over 15 years (34 percent).
