Homes in more than 1,000 cities and towns nationwide either already are, or soon will be, more expensive than ever, erasing any losses in value experienced during the recession, according to Zillow.
U.S. home values climbed 5.7 percent year-over year in the first quarter, to a Zillow Home Value Index of $169,800. National home values have climbed year-over-year for 21 consecutive months, a steady march upward that has helped put the housing recession almost entirely in the rearview mirror in 1,080 of the more than 8,700 cities and towns covered by Zillow.
In these areas, home values are already at or expected to reach pre-recession levels in the next year, including in many hard-hit areas. Among the 6,781 cities and towns covered by Zillow that experienced home value declines of 10 percent or more during the recession, values in 527 have either fully recovered or are expected to recover fully by the first quarter of 2015.
In a majority of metros, housing affordability is and will remain strong even as prices continue to rise. But homes in a handful of metros — including San Francisco, Los Angeles, San Jose and San Diego — are already unaffordable, with the share of residents’ incomes currently devoted to monthly mortgage payments exceeding historic norms.
“The lows of the housing recession are becoming an increasingly distant memory as home values reach new highs and homes become more expensive than ever in many areas. This is a remarkable milestone coming only two and a half years after the end of the worst housing recession since the Great Depression, and is a testament to just how robust this housing recovery has been,” said Zillow Chief Economist Dr. Stan Humphries. “So far, this steady appreciation has not created affordability issues in the majority of places. But there are a handful of markets where affordability is again a challenge, even with mortgage interest rates incredibly low. Mortgage interest rates won’t stay low forever. And rents have also been marching steadily higher for several years. As a result, the housing affordability issues we’re already seeing in select markets could become a much more widespread concern a few years from now. As affordability worsens, more residents will be forced to search for affordable housing farther from urban job centers, and home values in some areas may have to come down.”
Nationally, rents rose 2.7 percent year-over-year in the first quarter and 0.9 percent compared to the fourth quarter of 2013, to a Zillow Rent Index of $1,315. U.S. rents have risen year-over-year for more than two years straight.
The inventory of homes listed for sale on Zillow at the end of the first quarter fell by 0.5 percent year-over-year, after showing annual gains in each of the past six months. Inventory fell month-over-month in each of the three months of the first quarter.