Home Values Fall for First Time in Seven Years
Zillow Inc., Seattle, said the median U.S. home value dropped from March to April, the first monthly decline since February 2012.
The April Zillow Real Estate Market Report said the typical U.S. home is worth $226,800, down 0.1% month-over-month. Year over year, the median home value rose by 6.1%, the fourth straight month of slowing appreciation.
Zillow said the median U.S. rent rose to $1,477, up 2.6% from a year ago, the sixth straight month of growth.
The decline in home values, led primarily by large West Coast markets, comes after 85 straight months of gains that brought home values to record highs. Home values fell in 32 of the 35 largest housing markets over April and remained flat in two others. Riverside, Calif., was the only large market that saw its home values appreciate during the month. This downturn has been a longer-term trend in other large California markets–home values have fallen in at least each of the previous three months in San Jose, San Francisco, San Diego and Los Angeles.
Zillow said U.S. home values have experienced declines only twice over the past few decades: during the recession of the early 1990s and the Great Recession and housing crisis in the late 2000s.
“The widespread decline in home value growth in April – the first in many years – will turn heads. But it’s too early to say if we’ve hit another national home value peak and are at the beginning of a sustained downturn, or if this is just a bump in the road,” said Zillow Director of Economic Research Skylar Olsen. “Month-over-month numbers are volatile, and this small decline could reverse itself before the year is out and before national home values go negative on a year-over-year basis. That said, the likelihood that home values have peaked in several local markets is real. The price correction in these areas should continue after years of significant home value growth that substantially outpaced income growth.”
The report said home values have likely peaked in Los Angeles, Philadelphia, Houston, Miami, Boston, San Francisco, Seattle, San Diego, St. Louis, Tampa, Baltimore, Pittsburgh, Portland and San Jose.
The report said rent prices continued to accelerate, rising for the sixth consecutive month. The median U.S. rent rose 2.6% on an annual basis to $1,477. Rents grew the fastest in Las Vegas (7.8%), Phoenix (6.7%) and Orlando (6.4%).
Zillow said inventory fell 1.7% year-over-year in the U.S. Washington, D.C., saw the most significant drop, with 31.7% fewer homes for sale than this time a year ago. Despite the drop nationally, for-sale inventory has grown significantly in expensive West Coast markets San Jose, Seattle and San Francisco, in part to cooling demand rather than a flood of new listings.
Fannie Mae, Washington, D.C., said its leading indicators continue to suggest a solid spring home-buying season, revising upward its forecast for second quarter and full-year 2019 home sales. Fannie Mae Chief Economist Doug Duncan said pending sales and purchase mortgage applications are trending upward, while the lower mortgage rate environment and builders’ renewed focus on modestly sized homes are likely to support affordability.
And Freddie Mac, McLean, Va., said steady housing market growth is expected as a result of the positive impact of low mortgage rates, a strong labor market, low unemployment and modest wage growth.
Freddie Mac Chief Economist Sam Khater noted, however, that few U.S. homeowners are choosing to tap into their largest source of wealth despite having a record $16 trillion in home equity available to them. “Most homeowners remain reluctant to increase their mortgage balance, whereas we continue to see balance increases on auto loans, credit cards and student loans,” he said.
