U.S. Home Values Surge in August, Up 6.6% Annually
Zillow’s August Real Estate Market Reports, released today, show that national home values rose 0.4% from July to August to $162,100 (Figure 1). On a year-over-year basis, home values were up 6.6% (Figure 2) from August 2012. The last time national home values were at this level was in September 2004. Rents were up 1.9% on a year-over-year basis (Figure 3). The Zillow Home Value Forecast calls for 5.2% appreciation nationally from August 2013 to August 2014. Most markets have already hit a bottom – with only 1 out of 254 not projected to hit a bottom within the next year – and 78 out of the 254 markets covered are forecasted to experience home value appreciation of 4% or higher. Of the nation’s 30 largest metro areas covered by Zillow, all experienced year-over-year home value increases in August, with more than half up by double-digit percentages. This is in line with a broad reaching housing recovery. Large metro areas expected to show the most appreciation over the next year include. Metros with notable annual increases in August include Sacramento (34.1%), Las Vegas (30.6%) and Riverside, Calif. (29.7%).
Home Values
The August Zillow Real Estate Market Reports cover 382 metropolitan and micropolitan areas. In August, 292 (76.5%) of the 382 markets showed monthly home value appreciation, and 324 (84.9%) of the 382 markets saw annual home value appreciation. Among the top 30 metros, all but St. Louis experienced monthly appreciation, while all showed annual home value growth. Leading the pack in positive monthly appreciation were Riverside, Las Vegas, Minneapolis and Sacramento, which experienced 3%, 2.8%, 2% and 2% home value appreciation, respectively – an extremely brisk pace of home value appreciation. Overall, national home values were down 16.7% from their peak in May 2007 and up 9.5% from the post-recession trough in October 2011.
The Zillow Rent Index (ZRI) covers 512 metropolitan and micropolitan areas and shows year-over-year gains for 298 metropolitan areas covered by the ZRI. Currently national rents are up 1.9% on a year-over-year basis, which is a significant slowdown from 5% to 6% annual appreciation late last year (Figure 3). There is still enough demand from the unwinding of doubled-up households to sustain robust growth in both the for-sale, as well as the for-rent market (Figure 5). Large markets that saw extremely strong annual rent appreciation include Cincinnati (7.3%), Denver (5.6%), Miami (4%) and Orlando (3.8%).
Foreclosures
The rate of homes foreclosed continued to decline in August with 5.17 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 8.3% of all sales in August (Figure 4). This is down 3.1 percentage points from August 2012 and down 11.6 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. These states are also experiencing a slower and less forceful turnaround as foreclosures resales (REOs) continue to put downward pressure on home values.
Outlook
August was yet another strong month for home values. National home values have risen or remained flat month-over-month for almost two years, though the pace of monthly home value appreciation has slowed lately. August marked the third consecutive month in which monthly home values rose more slowly than the month prior. As we exit this year’s selling season, we will start to see a slowdown in home value appreciation, although our forecast calls for another 5.2% in home value appreciation from August of this year to next August. Certain risk factors remain in our forecast: Negative equity is still high at 23.8% of mortgaged homeowners underwater in Q2 of this year, and affordability is starting to decrease. Some markets, such as San Jose, will become very unaffordable with increasing mortgage rates. Overall, the recovery will enter the next phase with home value appreciation returning to more sustainable levels.
