The February Real Estate Market Reports show that national home values decreased 0.5% to $145,400 from January to February. On an annual basis, this represents a 4.5% decline (See Figure 2). The Zillow Rent Index, which measures median rent prices from month to month, shows the rental market continuing to outshine the for-sale market (See Figure 1). Annually, national rents have appreciated 2.0%. National monthly rents, however, are down due to seasonality.

Home values, now back to 2003 levels, combined with historically low financing rates are fueling homes sales, both existing and new, even while homes values continue to decline due to high levels of foreclosure re-sales, which set a new record in February. January existing home sales were very strong, while February slowed somewhat but still were quite strong when viewed on an annual basis (up almost 9%). February pending home sales were up a similar amount on a year-over-year basis, February new home sales were up 11% from the prior year, and both housing starts and permits were up 34% from year-ago levels.

Home Values

The ZHVI covers 164 metropolitan areas of which 109 showed monthly home value depreciation, while 47 metros showed home value appreciation. Of the 25 largest metros covered by the ZHVI, Phoenix was the only metro to show monthly and yearly home value appreciation. In an encouraging sign, hard-hit areas of Florida, including the Miami-Fort Lauderdale, Tampa, and Fort Myers metros did show monthly home value appreciation in February.

Major markets that continue to feel the downward pressure of the housing recession include the Chicago metro, falling 1.7% from January to February and 11% annually, the Atlanta metro, declining 1.1% month-over-month and 10.8% annually, and the Seattle metro, showing a monthly decline of 0.8 %, representing an annual decline of 7.4%.

Overall, national home values have fallen 25% from their peak in May 2007, and are now back to October 2003 levels. An interactive chart of all metro regions can be found at the bottom of this brief.

Rents

The Zillow Rent Index shows year-over-year gains for nearly 68% of the metropolitan areas covered by the ZRI. By contrast, only 8% of the metros areas covered by the ZHVI experienced annual home value increases.

The rental market remains strong, especially in markets that continue to experience consistent home value declines. For example, Chicago metro rents increased 8.6% over the past year, in comparison to an 11% fall in home values over the same period. In the Philadelphia metro, rents are up 14.8% while home values have fallen 5.4% year-over-year.

Foreclosures

The rate of homes foreclosed remained unchanged in February with 8.4 out of every 10,000 homes in the country being liquidated. Nationally, foreclosure re-sales have reached a new all-time high making up 20.3% of all sales in February (Figure 3). The rate of foreclosure re-sales has steadily increased over the last several months, a reflection of the heavier volume of foreclosures that have entered the market. Despite the expectations for stronger home sales, this increased liquidation rate will continue to put downward pressure on prices throughout the rest of the year.

Outlook

Nationally, the Zillow Home Value Forecast calls for a 3.7% home value decline from December 2011 to December 2012. With that said, as we get closer to a bottom, sub-regions within larger metro regions will begin to see positive home value performance – something that we are already beginning to see. For example, in the Phoenix metro in January 2011, only 18% of ZIP codes were seeing home value appreciation over the prior three months whereas 87% were seeing appreciation by the end of the year (December 2011). Miami showed a similar development, with 17% of the ZIP codes seeing home value appreciation in January of 2011, while 60% showed home values rising in December 2011.

The rental market remains positive territory as the housing market proceeds down its path to recovery. Rents continue to experience strong annual appreciation. High foreclosure rates will continue to spawn demand in the rental market and, in turn, attract investors.

A PDF version of this report can be found here.