US home prices up 0.3% nationally in May

The median US home value increased 0.3% in May compared to the previous month but overall prices are still 8.8% below the peak of the market in April 2007.

This takes the median price to $179,200, according to the latest Zillow Real Estate market report which tracks 514 areas around the country.

The data shows that 64% or metropolitan areas saw prices rise month on month and 67.3% saw annual price rises.

In May the four fastest growing markets among the nation’s 35 largest all experienced double digit annual home value appreciation; Denver, San Jose, Dallas-Fort Worth and San Francisco. In all four of these markets, home values have already surpassed their bubble-era peaks.

The most sluggish large markets in May were Boston were prices increased by just 0.2% annually, New York where prices were down 0.1% and Baltimore down 0.3%. All three are in the north east of the country.

According to Stan Humphries, Zillow chief economist, the market isn’t back to normal. ‘Low inventory, persistent negative equity and still low mortgage interest rates continue to distort the market in various ways,’ he said.

‘But the fact that local markets are once again largely rising and falling on their own merits and continuing to find some kind of equilibrium based on real market fundamentals like household formation rates and job and wage growth is encouraging. A truly normal national housing market is one in which local conditions rule,’ he added.

Over the next year home value growth is expected to slow even further to 2.2%, according to the Zillow Home Value Forecast. This will be some way below 2014 when home values rose 4.9%.

‘The country by and large rode the same big roller coaster through the housing bubble, bust, and recovery. May’s report shows local markets diverging, with some chugging along, some stalled out and some continuing to accelerate amid rising prices and competition. This is a positive sign that the market is returning to full health,’ Humphries pointed out.

‘In general, as mortgage rates begin to rise and incomes and household formation rates slowly increase, the baton is being passed in housing from a stimulus driven market to one driven by fundamentals. This transition from housing recovery to a more normal market is a good thing long term, but we can expect some bumps along the way. In the end, increasing household formation and stronger income growth should overcome the headwind of rising mortgage rates,’ he concluded.