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Rents rise in the US while home prices return to modest growth

After flat lining in the spring, quarterly home value growth has returned to a steady pace in the United States while rents have continued to accelerate, according to the latest index report.

The median home price reached $229,600, up 4.9% in the 12 months to August while quarterly growth rose 3.4%, up from 0.4% in May, suggesting the market has shifted back to a sustainable pace of growth.

The data from the Zillow index also shows that rent growth continued to accelerate, up 2% year on year to $1,595 per month.

But inventory, which has been persistently low for the past few years, is still falling and was down 3.9% year on year, the biggest drop in 16 months.

Each of the 35 largest metros is growing at a slower annual rate than a year ago, but quarterly growth has accelerated since May in 26 of them. Of these large markets, only San Jose, down 10.8% annually, and San Francisco, down 1.9%, saw year on year declines.

Meanwhile, home values in Las Vegas, Chicago, Portland, Seattle, Sacramento, Boston, Baltimore, New York, Los Angeles, Washington, D.C., and San Diego fell quarter on quarter.

The fastest-growing large markets were Indianapolis, up 7.9% year on year, Charlotte up 7.1% and Atlanta up 6.9%. These markets have led the way in each of the past few months. The biggest quarterly gains were in Pittsburgh with a rise of 1.7%, Tampa up 1.7% and Cleveland up 1.2%.

‘We have persistently strong consumer confidence and the significant drop in mortgage rates to thank for the housing market’s return to modest home value growth,’ said Zillow director of economic research Skylar Olsen.

‘While it may be a good time to lock in your 30 year fixed rate, the market is still starved for inventory and it’s getting harder again for buyers to find the right home. If current market conditions hold, it wouldn’t be a surprise to see home values continue to rise, but we could see a shift if consumer sentiment dips,’ he pointed out.

‘Similarly, rental markets continue to feel the pressure of under building in the past, a reality not overcome by the surge in large, pricier apartment buildings in downtown areas. Most of these buildings continue to readily lease up, and rent growth is expected to continue,’ he added.

Rents continued to pick up the pace in August, marking the second consecutive month that rent growth has accelerated. Rents are growing faster than a year ago in 29 of the 35 largest markets.

Both Las Vegas and Phoenix grew 6% annually, the largest yearly growth for any market since October 2016. Only one market fell year on year. Portland, which saw negative growth for the fifth month in a row.