Home-Value Growth Has Peaked; Cooling Market Puts Bubble Fears to Rest

Home values are still rising in most markets, but the rate of appreciation has slowed considerably, making the housing market less competitive for buyers, according to Zillow

- Inventory nationwide is up, with 18.6 percent more homes on the market this year than last.

- Markets with the most notable slowdowns include areas that had been among the hottest throughout the recovery, including California and the Southwest.

- The U.S. Zillow Home Value Index rose to $176,500 in September, up 6.5 percent year-over-year, the slowest annual pace in the last 12 months.

Oct 23, 2014, 08:00 ET from Zillow, Inc.

SEATTLE, Oct. 23, 2014 /PRNewswire/ -- Appreciation in home values is slowing definitively after nearly two years of accelerating year-over-year growth, according to the third quarter Zillow® Real Estate Market Reportsi. Homebuyers who have been priced out of hot markets will welcome the cooling off, and the most recent data should further combat worry about another housing bubble.

The rate of annual home-value appreciation peaked at 8.1 percent in April and has fallen in every month since. U.S. home values were up 6.5 percent year-over-year at the end of the third quarter, to a Zillow Home Value Indexii of $176,500.

The rate of appreciation is expected to continue to slow. Home values are forecasted to grow at 3%, roughly half their current pace, through the end of the third quarter of 2015, according to the Zillow Home Value Forecastiii.

As the market cools, the dynamic between buyers and sellers is also changing. At the end of the third quarter, there were 18.6 percent more homes on the marketiv than last year, and more homes listed recently had a price cut. In September, nearly 37 percent of listings on Zillow had at least one price cut in the past month, up from 33.6 percent in September 2013. The softening market means homebuyers will find less competition.

The pace of home value appreciation dropped off significantly in markets that had been among the hottest at times during the housing recovery, particularly in California and the Southwest. In Los Angeles, home-price appreciation slowed from 18.5 percent annually in the third quarter of 2013 to 8.3 percent over the past year. Annual appreciation in San Francisco slowed to 8.2 percent, compared to 23.5 percent over the same time period last year.

"What a difference a year makes. At this time last year, we were worrying about a number of frothy markets that looked like they could be on the edge of another housing bubble, places where homes were appreciating at more than 20 percent per year and where buyers' heads were spinning just trying to keep up," said Zillow Chief Economist Dr. Stan Humphries. "We always knew these market conditions couldn't last, and it's good to see us now on a more natural and sustained glide path down toward more normal market conditions of roughly 3 percent annual appreciation and more balance between buyers and sellers. Home values should continue to grow, but that growth will increasingly be driven by traditional market fundamentals like household formation and job growth, and less by artificial stimulants like decreased supply and widespread investor demand."

Nationally, rents rose 3.5 percent year-over-year in the third quarter, to a Zillow Rent Indexv of $1,335, rising 1.8 percent compared to the second quarter.

Metropolitan Area

 Q3 2014
ZHVI

Q3 2013
YoY % Change

Q3 2014
YoY % Change

Q3 2015
Forecasted % Change

YoY % Change
in Inventory

United States

$176,500

6.7%

6.5%

3.0%

18.6%

New York, NY

$381,600

3.9%

5.5%

1.6%

25.0%

Los Angeles, CA

$531,000

18.5%

8.3%

3.0%

21.1%

Chicago, IL

$188,200

6.1%

7.4%

2.5%

20.0%

Dallas-Fort Worth, TX

$148,400

8.4%

6.1%

4.4%

-5.4%

Philadelphia, PA

$202,700

2.3%

5.2%

2.5%

12.5%

Houston, TX

$150,300

11.4%

11.8%

2.1%

-15.2%

Washington, DC

$359,300

8.3%

5.6%

0.7%

51.4%

Miami-Fort Lauderdale, FL

$205,200

13.8%

15.7%

2.5%

33.9%

Atlanta, GA

$151,900

9.7%

14.7%

5.2%

13.9%

Boston, MA

$362,700

7.9%

5.0%

0.3%

21.8%

San Francisco, CA

$689,900

23.5%

8.2%

2.9%

20.2%

Detroit, MI

$113,500

20.0%

12.6%

3.5%

27.6%

Riverside, CA

$277,900

24.0%

12.9%

7.6%

40.3%

Phoenix, AZ

$193,700

18.0%

1.2%

2.8%

21.7%

Seattle, WA

$333,700

12.9%

6.9%

5.0%

24.8%

Minneapolis-St Paul, MN

$213,100

11.2%

8.1%

2.7%

37.2%

San Diego, CA

$466,100

19.0%

6.9%

2.6%

44.1%

St. Louis, MO

$129,100

2.3%

1.6%

2.0%

14.8%

Tampa, FL

$145,400

12.4%

11.8%

3.2%

18.6%

Baltimore, MD

$241,800

5.2%

2.7%

1.3%

36.8%

Denver, CO

$271,200

10.4%

11.3%

3.8%

-10.9%

Pittsburgh, PA

$123,800

3.9%

6.8%

3.3%

1.1%

Portland, OR

$274,100

12.3%

6.0%

3.9%

14.8%

Sacramento, CA

$325,800

23.9%

8.9%

5.7%

35.8%

San Antonio, TX

$144,300

6.0%

5.5%

2.9%

-2.5%

Orlando, FL

$168,100

15.3%

13.5%

5.0%

51.1%

Cincinnati, OH

$135,900

2.8%

4.6%

2.6%

3.4%

Cleveland, OH

$120,600

2.9%

3.3%

1.6%

6.3%

Kansas City, MO

$137,400

2.4%

5.4%

2.4%

-0.5%

Las Vegas, NV

$181,600

28.4%

13.4%

6.1%

39.6%

San Jose, CA

$813,500

20.2%

9.5%

4.8%

13.3%

Columbus, OH

$144,300

4.3%

7.8%

2.4%

-6.6%

Charlotte, NC

$155,900

4.3%

6.2%

2.0%

3.4%

Indianapolis, IN

$128,100

10.1%

-1.5%

2.9%

7.1%

Austin, TX

$217,900

10.6%

11.2%

2.9%

-6.6%

About Zillow:
Zillow, Inc. (NASDAQ: Z) operates the largest home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. The Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow MortgagesZillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Agentfolio®, Mortech®, HotPads™,  StreetEasy® and Retsly™. The company is headquartered in Seattle.

Zillow.com, Zillow, Zestimate, Postlets, Mortech, Diverse Solutions, StreetEasy, Agentfolio and Digs are registered trademarks of Zillow, Inc. HotPads and Retsly are trademarks of Zillow, Inc.

i The Zillow Real Estate Market Reports are a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Real Estate Research. For more information, visit www.zillow.com/research/. The data in Zillow's Real Estate Market Reports are aggregated from public sources by a number of data providers for 928 metropolitan and micropolitan areas dating back to 1996. Mortgage and home loan data are typically recorded in each county and publicly available through a county recorder's office. All current monthly data at the national, state, metro, city, ZIP code and neighborhood level can be accessed at www.zillow.com/local-info/ and www.zillow.com/research/data.
ii The Zillow Home Value Index is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.
iii The Zillow Home Value Forecast uses data from past home value trends and current market conditions, including leading indicators like home sales, months of housing inventory supply and unemployment, to predict home values over the next 12 months for the nation and for more than 250 markets across the country.
iv Each week, a count of the number of single-family, condominium and cooperative housing units listed for sale on Zillow is taken. The median of these values within a month is calculated as the monthly value. Because inventory can be seasonal, a seasonally adjusted value is reported using a standard STL procedure. This seasonally adjusted series is then smoothed using a three-month rolling average. More information is available at www.zillow.com/research.
v The Zillow Rent Index is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all single-family residences, condominiums, cooperatives and apartments in Zillow's database, regardless of whether they are currently listed for rent. It is expressed in dollars.

SOURCE Zillow, Inc.



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