• Home values in Q4 rose 3.2% over the previous quarter, the largest quarterly increase since at least 1996 (when Zillow records begin).
• Newly pending sales were up 21.7% in December from a year ago. 
• Rents are ticking up from annual lows and remain slightly ahead of last year

The housing market ended 2020 with an exclamation point, with home values up sharply in Q4 and notching their fastest quarterly growth rate on record. Sales are happening at a rapid clip as momentum that began gathering in June is still pushing forward at full force. And although prices are skyrocketing, record-low mortgage rates keep bringing buyers to the table by keeping monthly payments in reach.   

The typical U.S. home was worth $266,104 in December, up 8.4% (or $20,587) from a year ago — the largest annual increase since January 2014. Nationwide, quarterly home value growth in Q4 was 3.2% —  fastest such pace since at least 1996 (when the Zillow Home Value Index begins). 

At a local level, growth was also very rapid in a number of large metro markets as the market rode a wave of high demand deep into the winter, when the market would normally be cooling down. Many standout markets were in the nation’s southern Sun Belt, including Austin — the metro predicted to be hottest in 2021 — where home values grew 5.3% from the previous quarter, and Phoenix, San Diego and Salt Lake City (5.1% quarterly growth in all). Phoenix led all major metros in annual home value growth, up 15.3% compared to last December. It snatched the lead away from San Jose — up 15.2% year over year — and was ahead of Salt Lake City (13.2%), Seattle (13%) and Austin (12.9%). 

Monthly home value growth for the U.S. held steady at 1.1%, largely unchanged from November and the fastest month-over-month growth in the series history. Among large markets, monthly growth ranged from 0.6% in Las Vegas to 1.8% in Salt Lake City.

Rents nationwide were up 0.8% year-over-year, to $1,740/month (from $1,726/month in December 2019) — continuing a very slow recovery from October’s 2020 low of $1,728/month. Annual rent growth was stunted in 2020 as demand shifted into the for-sale market. A year ago, rents were climbing at 3.5% annually.

But the rental market is showing signs of an impending turnaround. Downward slides reversed course in late 2020 in markets including Washington, DC (up 0.2% month-over-month) in December, Boston (0.4%), Los Angeles (0.2%), Chicago (0.2%) and San Jose (0.6%). The rent recovery is broad-based, with positive monthly changes in 77 of the largest 100 MSAs (for which data is available) and the U.S. as a whole.  In some areas, including San Francisco (-0.6%), Seattle (-0.8%), and New York (-0.4%), the bottom is still to come, but monthly rent decreases are gradually slowing.

Nationwide, for-sale listings’ median time on market stayed extremely short in December at 14 days, just one day longer than lows reached earlier in the fall. Newly pending sales are down somewhat from prior months, following seasonal trends, but remain quite elevated year-over-year — up 21.7% compared to last year.

Mortgage rates listed by third-party lenders on Zillow reached an all-time low of 2.63% on Dec. 18. Rates entered December at an extraordinarily low 2.71%, reached a monthly high of 2.79% on Dec. 25 and ended the month at 2.75%. Even as prices rose late in 2020, record low mortgage rates have made monthly payments more affordable for buyers. Rates are currently on an upward trend, but are still far below long-term averages. 

Looking ahead, Zillow expects this robust home value growth and elevated levels of home sales to continue through the next calendar year. Our latest forecast calls for annual value growth to peak as high as 13.5% by mid-2021, and for home values to end 2021 up 10.5% from their current levels. Similarly, we expect existing home sales volume to remain elevated over the next 12 months thanks to low mortgage rates, an improving economy and demographic tailwinds fueling enduring demand.