Zillow’s July Real Estate Market Reports, released today, show that home values increased 0.5 percent to $151,600 from June to July (Figure 1), marking another month of healthy monthly appreciation. Compared to July 2011, home values are up by 1.2 percent (Figure 2), supported in many places by low for-sale inventory. Inventory shortages are being fueled by negative equity and a slowed distribution of REOs. According to Zillow’s first quarter Negative Equity Report, 31.4 percent of homeowners with a mortgage are underwater. A more in-depth analysis of the impact of negative equity on inventory shortages can be found here. In conjunction with rising home values, rents continued to rise in July, appreciating by 0.2 percent from June to July. On an annual basis, rents across the nation are up by 5.4 percent (Figure 3).Home Values
The Zillow Real Estate Market Reports cover 167 metropolitan areas (metros) of which 102 showed monthly home value appreciation. Among the top 30 metros, 21 experienced monthly home value appreciation and 14 saw annual increases. The largest monthly decline among the top 30 metros took place in St. Louis, where home values fell by 0.4 percent from June to July. Leading the pack on the appreciation side are Phoenix, San Jose and San Francisco, which experienced 2.2, 1.2 and 1.2 percent home value appreciation, respectively. Overall, national home values are down 21.7 percent since their peak in April 2007.
The Zillow Rent Index (ZRI) covers 306 metropolitan areas and shows year-over-year gains for 194 metropolitan areas covered by the ZRI. The rental market remains strong, especially in markets that continue to experience consistent home value declines. Metropolitan areas that saw extremely strong year-over-year rent appreciation include Philadelphia (11.7 percent), Chicago (12.6 percent), and Baltimore (11.9 percent).
The rate of homes foreclosed continues to decline in July with 5.7 out of every 10,000 homes in the country being liquidated. Nationally, foreclosure re-sales slowed a bit, making up 14.9 percent of all sales in July (Figure 4). The slowing of foreclosure re-sales is also contributing to home value appreciation, as these are usually sold at a discount and influence surrounding non-distressed sales.
Nationally, we continue on the road to recovery with our forecast calling for U.S. home values to increase annually by 1.1 percent by June 2013. In general, we believe that high levels of negative equity paired with relatively high unemployment will keep foreclosure rates higher than normal for at least the next 2-3 years. We expect that most markets will have reached their bottom by the end of this year and will start to show modest home value appreciation.