Price growth in the US has slowed to its lowest pace for 15 months
Home price growth across the United States is at its slowest pace in 15 months, up 6.7% to a median value of $207,600 in the 12 months to January 2018, the latest index shows.
This has slowed from annual growth of 7.6% in May 2017 with prices dropping about a tenth of a percentage point each month since last summer, according to the figures from real estate firm Zillow.
While home value growth is slowing, mortgage rates are picking up, ending the month of January at 4.04%, the highest rate in four years, with the firm pointing out that going into the usually busy spring market buyers may find prices not as high as expected but monthly mortgages costs higher.
‘The pace of home value appreciation we experienced during much of last year was not sustainable, and a slow glide path down to a more normal appreciation rate has been expected for some time,’ said Zillow senior economist Aaron Terrazas.
‘This slowdown is nothing to be overly concerned with as demand from home buyers remains very high, and inventory remains tight. New home construction is growing, providing some relief to buyers who can afford the generally high price point of new homes,’ he explained.
‘It’s important to note that home values are still growing very quickly relative to historic norms. After years of intense competition, some buyers may be more willing than previously to take more time with the process and to wait until the right home at the right price comes on the market, even if it’s not for several months. Removing a lot of this frenzy, especially as inventory remains incredibly tight, may prove to be good news for beleaguered buyers,’ he added.
Markets with the greatest home value appreciation are in the West, led by San Jose, Las Vegas and Seattle. Indeed, in San Jose prices rose 23%, about three times faster than its historic pace to a median home value of $1,202,900.
The report says that tight inventory will put even more of a strain on buyers than last year. There are almost 10% fewer homes on the market than a year ago, with San Jose, Las Vegas and Indianapolis reporting the greatest drop in inventory.
New home starts have increased about 7% over the past year, a positive trend but still insufficient to meet demand.
The index also shows that median rents rose 2.6% year on year to a median of $1,441 per month. Sacramento, Riverside, and Seattle reported the highest year on year rent rises of the 35 largest U.S. housing markets.
The median rent in Sacramento rose just over 8% year on year to $1,845 while rents in Riverside rose 6% and rents were up 5% in Seattle.