Home Value Growth Slowing Going into Spring Shopping Season
Over the past year, U.S. home values rose 6.7 percent, the slowest rate of appreciation since November 2016, said Zillow Inc., Seattle.
Home values across the U.S. rose to a median home value of $207,600 in January, the company’s monthly Real Estate Market Report said. San Jose, Calif., Las Vegas and Seattle reported the greatest home value growth over the past year.
Zillow Senior Economist Aaron Terrazas said despite increasing mortgage interest rates–the Mortgage Bankers Association this week reported the 30-year fixed rate at 4.62 percent–the slowing pace of home values could help buyers going into the spring home shopping season. He said buyers may find a slight relief on prices, but should expect higher mortgage rates to lead to an increase in monthly costs.
“The pace of home value appreciation we experienced during much of last year was not sustainable, and a slow glide path down to a more normal appreciation rate has been expected for some time,” Terrazas said. “This slowdown is nothing to be overly concerned with–demand from home buyers remains very high and inventory remains tight. New home construction is growing, providing some relief to buyers who can afford the generally high price point of new homes.”
Terrazas noted home values are still growing very quickly relative to historic norms. “After years of intense competition, some buyers may be more willing than previously to take more time with the process and to wait until the right home at the right price comes on the market, even if it’s not for several months,” he said. “Removing a lot of this frenzy, especially as inventory remains incredibly tight, may prove to be good news for beleaguered buyers.”
Zillow said markets with the greatest home value appreciation are in the West. In San Jose, home values rose by nearly 23 percent–three times faster than its historic pace–to a median home value of $1.202 million.
“Tight inventory will put a strain on buyers this home shopping season, even more so than last year,” the report said. “There are almost 10 percent fewer homes on the market than a year ago, with San Jose, Las Vegas and Indianapolis reporting the greatest drop in inventory. New home starts have increased about 7 percent over the past year, a positive trend but still insufficient to meet demand.”
Zillow also reported median rent across the nation rose 2.6 percent since last January, to $1,441 per month. Sacramento, Calif., Riverside, Calif. and Seattle reported the highest year-over-year rent appreciation among the 35 largest U.S. housing markets. Median rent in Sacramento rose just over 8 percent to $1,845. Rent in Riverside rose 6 percent year-over-year, and rent in Seattle rose 5 percent.
