Zillow: U.S. Home Value Growth Strong, But Slowing–Which Isn’t Such a Bad Thing

Zillow Inc., Seattle, said home value appreciation slowed for the seventh consecutive month in July and is now at its lowest level since 2015.

The company’s monthly Real Estate Market Report said the typical U.S. home is worth $229,000, up 5.2% from a year ago–the smallest annual appreciation since October 2015. Last year at this time, home values rose 7.7% year-over-year. Home value appreciation has slowed all seven reported months of 2019.

Despite the slowing, the report said home values rose by 0.3% month-over-month, which Zillow Director of Economic Research Skylar Olsen said indicates values are stabilizing after a period of relatively extreme growth, rather than headed for a sustained downturn.

Among the 50 largest U.S. markets, home values grew most in Salt Lake City (up 9.4% since July 2018), Indianapolis (up 8.1%) and Charlotte (up 7.3%), although the report noted growth is slowing in each of these metros. Only New Orleans, Birmingham, Ala., and Oklahoma City, Okla. saw home values appreciate at a greater rate than a year ago.

The report also noted home values have fallen year-over-year in California’s San Francisco Bay Area, home to the two most expensive markets in the country. The value of the typical home fell 10.5% in San Jose and 1.1% in San Francisco. A year ago, home values were growing 24% annually in San Jose–a 34.5 percentage point difference.

“As talk builds of a potential recession in the next year or two, housing remains fairly stalwart,” Olsen said. “Slowing appreciation is ultimately a good sign that the market is adjusting in response to the growing unaffordability of down payments, while low mortgage rates are keeping those with the required savings interested despite softer growth out the gate. The uptick in the rate of homes coming onto the market–a good and true increase in supply–should be a boon to those inventory-starved home buyers still searching near the close of home shopping season. While buyers are catching a break, renters have seen prices continue their steady upward climb, presenting yet another obstacle in the quest to save for that down payment.”

Zillow reported the median U.S. rent rose 1.9% year-over-year to $1,592. For the eighth consecutive month, rents rose the most in Phoenix (up 6.1% from a year ago), followed by Las Vegas (up 5.9%). Rents fell in only three of the 50 largest markets–Houston, Buffalo and Baltimore.

The report said inventory grew 1.3% annually, reversing four straight months of declines. Zillow reported 19,978 more homes for sale than this time last year. New listings drove the inventory growth in July, up 5.7% from a year ago.