U.S. Home Values Post Largest Monthly Gain Since 2006; Majority of Markets Forecasted To Hit Bottom by Late 2012

Zillow’s first quarter Real Estate Market Reports, released today, show home values decreased 0.5 percent from the fourth quarter of 2011 to the first quarter of 2012 to $146,200 (Figure 1). On an annual basis, home values are down 3.1 percent from March 2011 levels (Figure 2). Despite showing quarterly and annual depreciation, the quarter ended positively with home values rising significantly in March (up 0.5 percent from February). While we are encouraged by strong data in March, it is too early to call rising home values a trend as we still expect some modest declines in national home values this year with a definitive national bottom later this year or early 2013. According to the Zillow Home Value Forecast, we expect national home values to fall 0.4 percent over the next year. Markets that already appear to have reached a bottom include Boston, Dallas, Denver, Miami, Orlando, Philadelphia, Phoenix, Pittsburgh, St. Louis and Tampa. Additionally, we expect Baltimore, Los Angeles, and San Jose to reach a bottom this year. The trend in Las Vegas, New York, Portland, Riverside, and San Diego, however, is still uncertain enough to make near-term predictions difficult. Low home values paired with extraordinarily low mortgage rates should serve as a signal to consumers that now is a good time to buy. As more home buyers get off the fence, home sales, both existing and new, will continue increasing and help stabilize home prices in the long run.

Home Values

The Zillow Real Estate Market Reports cover 165 metropolitan areas (metros) of which 70 showed quarterly home value appreciation. Five metros remained flat, while 90 metros show home values losses. A sign of the times that a recovery is on the horizon exists in the 18 markets that reported both quarterly and annual home value appreciation. Among these metros were Pittsburgh, Denver, Honolulu, Phoenix, and Miami-Fort Lauderdale – the latter two having been poster children of the housing downturn.

Overall, national home values are back to late 2003 levels, falling 24.6 percent since their peak in May 2007. An interactive chart of all metro regions can be found at the bottom of this brief.


The Zillow Rent Index (ZRI) shows year-over-year gains for over 70 percent of the metropolitan areas covered by the ZRI. By contrast, only 14 percent of the metro areas covered by the ZHVI experienced annual home value increases. In addition to high home affordability and low mortgage rates, rising rents will make home buying more attractive, increasing the longer term demand for homes and helping to put a floor under home values.


Surprisingly, the rate of homes foreclosed significantly decreased in March with 7.4 out of every 10,000 homes in the country being liquidated. While we had been expecting an increase in foreclosure liquidations after the multi-state attorneys general settlement in February, we are not yet seeing evidence of this in the data. It is not yet clear whether an increase is in the offing or the pace of foreclosures will not ever return to pre-robo signing levels.

Nationally, foreclosure re-sales increased to a new high making up 20.5 percent of all sales in March (Figure 3). Despite this month’s dip in the foreclosure liquidation rate, we expect foreclosure re-sales to continue their steady increase that we’ve seen over the last several months. While the heavy volume of foreclosures will put downward pressure on prices, this is an inevitable step on the road of housing market recovery.


The pieces of a housing bottom and recovery are falling into place. While we expect a national bottom in housing prices later this year or in early 2013, some metros, such as Miami and Phoenix, have already hit bottom. The recovery in most areas will be a hyper-local process, where individual ZIP codes will start to recover before the metro area as a whole. This is already the case in the metro areas of Detroit and San Francisco.


A PDF version of this can be downloaded here.