Home Prices, Values Up; Inventories Down; Credit Scores Improve

Zillow, Seattle, said despite slowing home price growth, home buyers are still feeling the pinch because of low housing inventories and rising rents.

In a separate report, Redfin, Seattle, said home price value continued to accelerate, reaching their highest levels since July 2018. And Experian, Costa Mesa, Calif., said average consumer credit scores improved to their highest ranking since 2011.

Zillow reported U.S. home values grew by 3.8% year over year to $243,225, the smallest annual growth since January 2013. But Zillow noted quarterly growth has reaccelerated in recent months.

Zillow said annual home value growth has now slowed in each of the past 19 months, but Zillow Director of Economic Research Skylar Olsen characterized it as a “gradual slowdown, not slamming on the brakes.”

“The drop in year-over-year growth has not exceeded 0.3 percentage points from one month to the next during this period,” Olsen said. “Quarterly home value growth–a better indicator of recent shifts in the market–shows the market may have turned a corner and the slowdown will not continue for long. The pace of quarter-over-quarter home value growth has accelerated in each of the past three months, though it remains slower than this time last year.”

Zillow said the slowdown has been felt in much of the country. Among the 35 largest U.S. metros, only San Antonio and Washington, D.C., are growing at a faster annual rate than they were at this time last year. San Jose, Las Vegas, San Francisco and Seattle have slowed the most. San Jose and San Francisco continue to be the only large markets with declining year-over-year home values, though those numbers have become less negative over the past month.

The report said Phoenix is the fastest-growing top-35 market, up 6.1% year over year. Columbus is next at 5.9% annual growth, followed by Charlotte (up 5.8%) and Indianapolis (up 5.7%). The relative affordability of these markets, combined with solid employment numbers, continues to bolster their appeal. 

“As we approach the winter holidays, housing, too, is taking a breather,” Olsen said. “Motivated sellers trying to close before the end of the year dropped their list prices in September and October, with November numbers showing the expected quiet in listing activity. That quiet is echoed by the slower annual appreciation and the lower-than-normal available inventory. But as we anticipate longer days to come, so too we anticipate some relief for housing. Lifting housing starts and permit numbers, strong jobs reports and the steady progress towards more stable and sustainable home value appreciation all point to a healthier 2020 for housing.”

Zillow reported the typical U.S. rent rose to $1,600, up 2.3% from this time last year, the fifth consecutive month of acceleration. Phoenix has the fastest-growing rents in the country by a large margin, up 7.6% year over year. Las Vegas is second at a comparatively paltry 5.1%. Rents are falling in Columbus (down 1.9% year over year), Houston (down 0.7%) and San Antonio (down 0.2%).

The report said inventory fell again, reaching the lowest level dating ack back to 2013. The 6.4% year-over-year drop is the biggest in 20 months. The report noted102,463 fewer homes on the market than at this time last year. Inventory fell the furthest in Seattle (down 28.8%), Sacramento (down 21.2%) and San Diego (down 19.9%).

Mortgage rates listed on Zillow rose to 3.67% in November after starting the month at 3.62%. Rates peaked at 3.78% on November 8, before falling to a monthly low of 3.58% on November 18. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect recent changes in the market.

Meanwhile, Redfin reported home sale prices increased by 5.2% year over year in November to a median of $311,600, the largest since July 2018, when home prices were up 5.6% from a year earlier.

“Given that inventory is falling quickly, we’d expect to see even stronger price growth, especially when compared to last year’s soft market,” said Redfin chief economist Daryl Fairweather. “The fact that homes are selling faster indicates that there are buyers ready to pull the trigger and take advantage of low interest rates. If lack of inventory and high demand continues, buyers who take a wait-and-see approach could face less favorable conditions in the spring season like bidding wars and faster price growth.”

Redfin said affordable metro areas again saw the biggest home price gains in November. For the fifth month in a row, the nine metro areas with the biggest gains all had median sale prices below the national median, led in November by Camden, N.J. (median price $200,000, up 14.3%), Detroit ($140,000, +12.0%) and Bakersfield, Calif. ($249,999, +11.6%). For the first time in five months, the metro area with the 10th-largest price gains in the nation was one with a median price above the national median: Salt Lake City ($345,000, +9.5%).

Nationwide, Redfin reported home sales increased 3.0% year over year in November, the fourth consecutive month of increases, and were down less than 1% from October on a seasonally-adjusted basis. The markets with the biggest increases in home sales from a year ago were McAllen, Texas (14.7%), Anaheim, Calif. (10.2%), and Virginia Beach, Va. (9.2%). The supply of homes for sale fell 12.1% year over year, the biggest decline since April 2013 and the fifth straight month of declines. There were fewer homes for sale last month than in any November since at least 2012. Just six of the 85 largest metros tracked by Redfin posted a year-over-year increase in inventory, led by Knoxville (+12.0%), El Paso (+5.2%) and Honolulu (+2.6%).

Meanwhile, Experian said its annual State of Credit report showed consumers’ average credit score hit an eight-year high at 682, a two-point increase year-over-year.

The report also noted while people are taking on slightly more credit card, mortgage and non-mortgage debt year-over-year, delinquency rates are decreasing on average.

“We’re seeing a promising trend in terms of how Americans are managing their credit as we head into a new decade with average credit scores increasing two points since 2018 to 682–the highest we’ve seen since 2011,” said Shannon Lois, Experian head of analytics, consulting and operations. “Average credit card balances and debt are up year over year, yet utilization rates remain consistent at 30 percent, indicating consumers are using credit as a financial tool and managing their debts responsibly.”

When comparing the borrowing behaviors of men and women, the report showed women have a four-point lead over men, with an average credit score of 686 compared to 682. It noted men carry more non-mortgage and mortgage debt than women at $27,314 and $220,421 respectively; compared to $24,176 and $203,630. Women have more credit cards (3.17 compared to 3.01) and retail cards (2.83 compared to 2.13) but carry lower balances with an average credit card balance of $6,569, compared with $6,872 and an average retail card balance of $1,858 compared to $2,087. Men have a slightly higher 90+ days past due delinquency rate (34% compared to 33%).

The report also showed Gen Xers, millennials and Gen Zers tend to carry more debt (including mortgage, nonmortgage, credit card and retail card) than older generations and have higher delinquency and utilization rates.

Experian also ranked states by average credit score in 2019. Minnesota, Vermont, South Dakota, New Hampshire and Massachusetts are the top-ranking states in the nation, with prime credit scores of 705 or more. Mississippi, Louisiana, Alabama, Texas and Oklahoma are the five lowest-ranking states, with credit scores below 660.