Zillow’s November Real Estate Market Reports, released today, show that national home values rose 0.6% from October to November to $168,900 (Figure 1). On a year-over-year basis, home values were up 7.1% (Figure 2) from November 2012. The last time national home values were at this level was in November 2004. Rents were up 2% on a year-over-year basis (Figure 3), as they continue their steady upward climb. The Zillow Home Value Forecast calls for 4.6% appreciation nationally from November 2013 to November 2014 – a marked slowdown from the more than 7% appreciation seen in the past year.
118 out of the 291 markets covered are forecasted to experience home value appreciation of 3% or higher. Of the nation’s 35 largest metro areas covered by Zillow, all but St. Louis experienced year-over-year home value increases in November, with nearly half up by double-digit percentages. Metros with notable annual increases in November include Las Vegas (30.9%), Riverside (29.2%) and Sacramento (25%).
These annual and monthly trends are in line with a broad and robust housing recovery that is starting to slow down as home value appreciation rates fall back to more sustainable growth levels. Some markets will experience volatility in the coming years fueled by decreasing affordability, as mortgage rates rise, and increased supply of for-sale homes, as negative equity recedes and new construction increases.
The November Zillow Real Estate Market Reports cover 485 metropolitan and micropolitan areas. In November, 374 (77.1%) of the 485 markets showed monthly home value appreciation, and 427 (88%) of the 485 markets saw annual home value appreciation. Among the 35 largest metro areas covered by Zillow, 7 exhibited monthly depreciation in November. The biggest declines were in St. Louis (-0.8%), Indianapolis (-0.7%), Dallas (-0.5%) and Phoenix (-0.3%). Overall, national home values are still down 14% from their peak in April 2007.
The Zillow Rent Index (ZRI) covers 517 metropolitan and micropolitan areas and shows year-over-year gains for 379 metropolitan areas covered by the ZRI. Currently national rents are up 2% on a year-over-year basis, which is a significant slowdown from 5% to 6% annual appreciation during summer of 2012 (Figure 3). Large markets that saw extremely strong annual rent appreciation include Denver (8.5%), Cincinnati (7.6%), Columbus (7.6%) and Seattle (7.2%).
The rate of homes foreclosed continued to decline in November with 5.09 out of every 10,000 homes in the country being liquidated. The last time it was at this rate was in December 2007. Nationally, foreclosure resales also continued to fall, making up 8.92% of all sales in November (Figure 4). This is down 1.4 percentage points from November 2012 and down 11.2 percentage points from its peak level of 19.9% in March 2009. The foreclosure pipeline is slowly being cleared out; however, judicial foreclosure states, such as New York, New Jersey and Connecticut, are much slower in clearing the foreclosed home backlog.
2013 ends on a positive note and certainly brought with it a few surprises. We had double-digit increases in home values with some markets, especially in the West, saw 20-30% annual appreciation. At the depth of the recession, we never could’ve guessed home values would skyrocket off the bottom so quickly. Mortgage rates were below 4% for quite some time, and demand – both from consumers and investors – really ramped up. We saw bidding wars, and first-time home buyers were pushed out of the market with little for-sale inventory. 2014 will be different, but in a good way. Decreasing negative equity rates will increase available inventory. This increase in supply will contribute to the undergoing slowdown in appreciation – as November data has already hinted at – and we will turn to more sustainable rates of appreciation. This will allow for more consumers to enter the market and buy homes. After a year of double-digit appreciation, home value growth in places such as San Francisco, San Jose and Phoenix will slow down, though they will still be outpacing historic norms. Despite these slowdowns, 2014 will see more expensive homes with affordability becoming an issue in many California markets and higher mortgage rates. We expect that the 30-year fixed mortgage rates will pass the 5% mark later in 2014. Our forecast calls for another 4.6% appreciation from November 2013 to November 2014, which is more in line with historical appreciation rates.