South Housing Markets Appreciating Fastest
While home price appreciation nationwide suggests a heated housing market, some markets–particularly those in the South–are hotter than others, said Zillow Inc., Seattle.
The company’s monthly Home Value Index reported U.S. home values rose by 7.2 percent over the past year, to an average of $195,300 in January, to less than 1 percent of peak value reached in April 2007 ($196,000) and well above the trough ($151,000 reached in December 2012.
Zillow also reported rents rose by 1.4 percent over the past year. The Zillow Rent Index for January showed the average rent is $1,404 per month.
The report showed while California markets have slowed significantly, some non-traditional Southern markets have kicked into gear, particularly in Florida, Tennessee and Texas.
Nashville, Portland, Ore., and Tampa reported the fastest year-over-year home value growth, all appreciating by more than 10 percent. Orlando, Detroit, Las Vegas and Miami are also among the top 10 fastest appreciating markets, a shift away from California dominance. Home values in Nashville rose by 9 percent a year ago, but are now rising at more than 12 percent annually, the fastest among the 40 largest U.S. metros. Conversely, San Francisco and San Jose were both among the top 10 fastest appreciating housing markets at this time last year, but today are among the slowest.
Zillow Chief Economist Svenja Gudell noted West Coast metros have been among the powerhouse markets driving overall home value growth for the past several years, with new residents flocking to tech-hubs for jobs. However, as cost of living becomes increasingly expensive, home shoppers are having a hard time finding affordable housing in these areas, noting just four of the 10 fastest appreciating housing markets are in the West.
“Southern markets, like Nashville and Dallas, are desirable for home shoppers in search of job opportunities, reasonably priced homes and an overall good quality of life,” Gudell said. “We spend a lot of time focusing on the West Coast, but power-house markets exist throughout the country. Florida and Texas home values have grown quite a bit over the past several years, stealing the spotlight from slower moving markets like San Francisco, San Jose and Los Angeles.”
Gudell noted slowdowns in the Bay Area, in particular, are driven by such high home prices that many people can no longer realistically afford to buy there, limiting demand and reducing pressure on home values. She said recent increases in the national pace of home value appreciation could lead to a nationwide slowdown in 2017 as some headwinds begin blowing in, including increasing mortgage rates and worsening affordability.
Seattle, Portland and Sacramento reported the highest year-over-year rent appreciation among the 40 largest U.S. housing markets. Also among the markets with the fastest appreciating rents are the California markets San Diego and Los Angeles, indicating the shift in places with rapidly rising home values has yet to hit the rental market.
The report said low inventory continues to be a problem for home shoppers across the country, with 3 percent fewer homes to choose from than a year ago. Minneapolis, Detroit and Cincinnati reported the greatest drop in inventory among the 40 largest U.S. metros; Minneapolis reported nearly 18 percent fewer homes to choose from than a year ago. Detroit reported 17 percent fewer homes.
