US housing values drop for first time in almost four years

The housing market in the United States is slowing down, with home values falling month on month for the first time in almost four years, according to the latest index data.

Prices fell 0.1% in July compared to the previous month and year on year growth was 3%, down from 3.4% in June, the Zillow real estate market report shows.

The report says that nationally home value appreciation is levelling off after its rapid pace in the early years of the recovery. Of the 517 metros covered by the Zillow index, 204 saw a slowdown, including major metros like Washington, DC and Cincinnati.

Zillow says that the slowing appreciation is a sign that the market is returning to normal and economists have expected to see growth flattening out as the recovery continues.

Even strong markets like Denver, Dallas, San Jose and San Francisco, which had double digit annual home value growth in July, saw their monthly appreciation rates ease compared with June.

‘This slight dip in home values is a sign of the times. Many people didn't think it was happening, but it is. We've been expecting to see a monthly decline as markets return to normal,’ said Zillow chief economist Svenja Gudell.

‘However, this is not like the bubble bust. We're not going to see 10% declines. The market is levelling off, and it's good news, particularly for buyers, because it will ease some of the competitive pressure,’ Gudell added.

She explained that slowing home values could provide more opportunities for hopeful buyers who have been waiting on the side lines for the market to cool off. ‘More homes may be coming online as home owners who have been watching strong home value growth decide to list their houses as appreciation slows and smaller gains are expected. This could help ease the constrained inventory the market has been facing for the past several months,’ she pointed out.

Meanwhile, the index also shows that residential rents continue to grow at a rapid pace, up 4.2% from last July to $1,376. With no sign of rents slowing down and the potential for more homes for sale, conditions may be right for buyers to enter the market, the firm suggests.