Home Value Appreciation Slows in Most Major Markets

Zillow Inc., Seattle, said annual home value growth slowed in more than half of the nation’s largest housing markets from a year ago, with Seattle and San Jose, Calif., seeing the biggest declines in appreciation.

A separate report from Redfin, Seattle, said all four U.S. regions saw double-digit drops in home sales to close out 2018.

The Zillow monthly Real Estate Market Report said home value appreciation slowed in December from a year ago in 19 of the 35 largest housing markets. Despite this, the typical U.S. home was worth $223,900, 7.6 percent more than a year ago; national home value appreciation was 7.4 percent. Home value appreciation across much of the country has been fairly steady over the past year.

Zillow also reported the median rent increased by 1.4 percent over the past year, the biggest annual increase since June 2018.

The report noted a year ago, home values in Seattle came in at 12.4 percent annual growth. They continued to appreciate at a double-digit pace through early 2018, but slowed to 5.0 percent in the seven months leading into December. San Jose saw a similarly steep drop in appreciation, from 16.8 percent in December 2017 to 9.9 percent in December (to a hefty $1.253 million).

By contrast, inn several more affordable Southern markets, home value appreciation accelerated over the past year. In Atlanta, for example, appreciation increased from 8.1 percent at the end of 2017 to 13.2 percent in December.

Skylar Olsen, Zillow Director of Economic Research and Outreach, said even as appreciation slowed in 19 of the nation’s 35 largest housing markets, national home value growth is faster than it was when the market was coming out of the Great Recession. The fastest home values grew in the earliest years of the recovery was 7 percent in early 2014.

“Looking at the nation as a whole, housing appreciation seems stabilized at an arguably aggressive pace,” Olsen said. “The exceptions to the rule are the metros that saw the fastest appreciation over the past few years, where home values far outpaced incomes. Employment growth continues, but that kind of extreme home value growth isn’t sustainable, and home buyers’ willingness and ability to outbid each other is falling back fast. We expect continued slowdowns in those expensive coastal markets. A three-month trend in increasing inventory ended, telling buyers that the pendulum hasn’t fully swung in their favor for this year’s home shopping season.”

The median rent increased 1.4 percent from the previous December to $1,460, the biggest annual increase in rents since June. Orlando rents saw the biggest jump, up 6.4 percent over the past year to $1,496. Rents fell 1.3 percent in Portland, Ore.

The report noted inventory fell slightly over the past year, down 0.4 percent since December 2017. This came after three consecutive months of gains in the number of homes for sale, “suggesting that national sustained inventory growth is not here yet,” Olsen said.

Despite that, several major markets saw big gains, led by San Jose (up 47.6 percent to $3,536 per month), Seattle (up 32.9 percent to $2,213 per month) and San Diego (up 32.2 percent to $2,606 per month).

Redfin reported all four regions saw double-digit declines in home sales in November and December. The year-over-year trend was particularly drastic in the Northeast, where new-home sales fell by 16.1 percent in December; Redfin data show the region has not experienced growth since January 2017.

The report also noted home sales fell by 10.3 percent in the South; by 13.4 percent in the Midwest; and by 13.4 percent in the Midwest.

“All around the country homebuyers were backing off at the end of last year due to high prices and high mortgage interest rates, and 2018 tax reform made it even more expensive to buy high-priced homes in high-tax states like Massachusetts, Connecticut and New York,” said Redfin Chief Economist Daryl Fairweather. “New homes tend to be pricier than existing homes, which is one reason sales of new homes dropped off so much in the Northeast.”

Fairweather said new homes could pick up in the coming months, citing an uptick in builder confidence, the recent decline in mortgage rates and continued job growth. Another factor that could contribute to an increase in new-home sales is a decline in the cost of building materials; t price of materials came down 1.8 percent in December.

Redfin reported the median sale price for new homes in the fourth quarter was unchanged at $371,200 from a year ago. Supply of new homes increased by 7.4 percent annually in the fourth quarter, while supply of existing homes rose by 5 percent. The typical new home was on the market for 91 days, five days less than the year before. Existing homes spent a median of 43 days on market, two days less than the year before.