Price growth in southern US now outperforming California, latest research shows

Housing markets in California are no longer the fastest growing in the United States as they are being overtaken by Florida, Texas and Tennessee, according to new real estate market research.

With the latest index from real estate firm Zillow showing that home values have increased by 7.2% in the year to January 2017 and some locations have recorded double digit growth and southern markets are seeing the biggest shift.

Nashville, Portland and Tampa recorded the fastest year on year home value growth, all up by over 10% while Orlando, Detroit, Las Vegas and Miami were also among the top 10 fastest appreciating markets, a shift away from California dominance.

Home values in Nashville were up 9% a year ago but are now rising at more than 12% annually, the fastest among the 40 largest US metros. San Francisco and San Jose were both among the top 10 fastest appreciating housing markets at this time last year but are now among the slowest.

The report explains that West Coast metros have been among the powerhouse markets driving overall home value growth for the past several years, with new residents flocking to tech-hubs for jobs.

However, as the cost of living becomes increasingly expensive, home seekers are having a hard time finding affordable housing in these areas as just four of the 10 fastest appreciating housing markets are in the West. Southern markets, like Nashville and Dallas, are desirable for home shoppers in search of job opportunities, reasonably priced homes and an overall good quality of life.

‘We spend a lot of time focusing on the West Coast, but powerhouse markets exist throughout the country. Florida and Texas home values have grown quite a bit over the past several years, stealing the spotlight from slower moving markets like San Francisco, San Jose and Los Angeles,’ said Zillow chief economist Svenja Gudell.

‘Slowdowns in the Bay Area, in particular, are driven by the fact that these markets are so expensive that many people can no longer realistically afford to buy there, limiting demand and reducing pressure on home values,’ she explained.

‘Despite recent increases in the national pace of home value appreciation, I expect a nationwide slowdown in 2017 as some headwinds begin blowing in, including increasing mortgage rates and worsening affordability,’ she added.

The market report also shows that rents across the nation were up 1.4% since last January to a $1,404 per month. Seattle, Portland and Sacramento reported the highest year on year rent appreciation among the 40 largest US housing markets.

Also among the markets with the fastest appreciating rents are the California markets San Diego and Los Angeles, which the report says indicates the shift in places with rapidly rising home values has yet to hit the rental market.

Low inventory continues to be a problem for home shoppers across the country, the report also says as there are 3% fewer homes to choose from than a year ago with Minneapolis, Detroit and Cincinnati reporting the greatest drop in inventory among the 40 largest metros. In Minneapolis there are about 18% fewer homes to choose from than a year ago and 17% fewer in Detroit.