Zillow's 2nd quarter Real Estate Market Report, released today, show home values increased 2.4% from quarter 1 of 2013 to the second quarter of 2013 to $161,100. ? This quarter marks the biggest yearly gain since August 2006 and largest quarterly gain since the 4th quarter of 2005. On an annual basis, the Zillow Home Price Index (ZHVI) rose 5.8% from June 2012 levels.
Monthly appreciation remains powerful with countrywide home values growing by 0.9% from May. Not only did the pace of home value appreciation quicken in the second quarter, but the recovery also fully took hold countrywide. Markets in some areas of the Northeast, Midwest and Southeastern US, such as Atlanta, Chicago and St. Louis, that had previously been slow to turn the corner started to appreciate, which helped galvanize the state market. All the top 30 largest metro areas covered experienced annual appreciation in home values as of the end of quarter 2, and all have hit their bottom.
In the opinion of the Zillow Home Worth Prediction (ZHVF), we predict nationwide home values to increase 5% over the following year (June 2013 to June 2014). Of the 257 markets covered by the Zillow Home Value Outlook, 241 markets are expected to see increases in home values over the next year, with the largest increases predicted in the Sacramento metro (18.9%) and the Riverbank metro (16.6%). Many California markets follow closely at the head of the list of markets expected to see the highest home worth appreciation over the following year. In the opinion of the ZHVF, 234 markets (91%) have recently hit a bottom in home values, and another 13 are expected to hit a bottom by June 2014.
Home Values
The Zillow Real Estate Market Reports cover 389 urban and micropolitan areas (metros) of which 259 showed quarterly home worth appreciation. Three metros stayed flat, while 127 metros show home values losses. Roughly 72% of the metros covered by the Real Estate Market Reports posted yearly increases in home values â€" an indication of the nation's housing recovery continuing to take hold. Among the biggest metros, Sacramento showed the biggest annual increase with home values rising 29.5% from quarter 2 of 2012 to the second quarter of 2013. We do accept that appreciation rates will return to more sustainable levels over the next year or 2. Overall, nationwide home values are back to Aug 2004 levels, down 17.2% since their peak in May 2007.
Rents
The Zillow Lease Index (ZRI) covers 496 metro areas, and 57% of those metros reported yearly increases in rents in June. As a point of comparison, just about 72% of the metro areas covered by the ZHVI experienced yearly home worth increases. Nationally, rents increased 1.6% in June from year-ago levels, denoting a slowing. This is a significant annual decline in the rental appreciation rate from its peak appreciation of 6.2% nationally in September 2012.
This development mixed with rising home values is another contributor to investors exiting some markets as they had frequently bought for-sale inventory to convert them to for-rent properties. Markets that continue seeing highly robust year-over-year hire increases include Cincinnati (10.5%), Denver (5.5%) and Boston (4.3%).
Foreclosures
The rate of houses foreclosed continued to decrease in June with 4.96 out of each 10,000 homes in the country being liquidated through foreclosure. Nationally, foreclosure resales remain low, making up 9.53% of all sales in June, down 3.6 percentage points from Q2 of 2012, underlining the limited stockpile of foreclosure resales. For-sale inventory levels remain restricted, with lots of metro areas across the country having fewer for-sale lists available in June compared with last year, although constraints are starting to ease. The absence of foreclosure resales and normal for-sale inventory in numerous markets is contributing to home worth appreciation. In the second half of the year we are expecting continued easing with speculators beginning to slowly exit markets. As home values continue to climb.
Outlook
With the housing recovery in effect, many homeowners are feeling a feeling of whiplash after a period of depreciation, but this sort of market behavior will not last. Backers are beginning to pull out of some markets â€" as home values are climbing higher â€" and regular customers are coming back, now that they can be competitive again. Though, some purchasers are beginning to feel the reduction in purchasing power due to higher mortgage rates. More for-sale inventory is slowly but surely coming on line, as homes are liberated from negative equity and more homeowners are deciding to sell. Both of these developments will make a contribution to slowdowns in appreciation towards more tolerable rates.
The US ?housing market? As a whole is currently not experiencing a bubble, but in numerous places it may feel just like one, with some markets (Sacramento, Vegas, San Francisco) experiencing yearly home value appreciation approaching 30%. In some overheated markets, fast home value increases coupled with rising mortgage rates will lead on to housing prices and financing costs outpacing local earnings expansion, which may also contribute to a moderation of the market.
Monthly appreciation remains powerful with countrywide home values growing by 0.9% from May. Not only did the pace of home value appreciation quicken in the second quarter, but the recovery also fully took hold countrywide. Markets in some areas of the Northeast, Midwest and Southeastern US, such as Atlanta, Chicago and St. Louis, that had previously been slow to turn the corner started to appreciate, which helped galvanize the state market. All the top 30 largest metro areas covered experienced annual appreciation in home values as of the end of quarter 2, and all have hit their bottom.
In the opinion of the Zillow Home Worth Prediction (ZHVF), we predict nationwide home values to increase 5% over the following year (June 2013 to June 2014). Of the 257 markets covered by the Zillow Home Value Outlook, 241 markets are expected to see increases in home values over the next year, with the largest increases predicted in the Sacramento metro (18.9%) and the Riverbank metro (16.6%). Many California markets follow closely at the head of the list of markets expected to see the highest home worth appreciation over the following year. In the opinion of the ZHVF, 234 markets (91%) have recently hit a bottom in home values, and another 13 are expected to hit a bottom by June 2014.
Home Values
The Zillow Real Estate Market Reports cover 389 urban and micropolitan areas (metros) of which 259 showed quarterly home worth appreciation. Three metros stayed flat, while 127 metros show home values losses. Roughly 72% of the metros covered by the Real Estate Market Reports posted yearly increases in home values â€" an indication of the nation's housing recovery continuing to take hold. Among the biggest metros, Sacramento showed the biggest annual increase with home values rising 29.5% from quarter 2 of 2012 to the second quarter of 2013. We do accept that appreciation rates will return to more sustainable levels over the next year or 2. Overall, nationwide home values are back to Aug 2004 levels, down 17.2% since their peak in May 2007.
Rents
The Zillow Lease Index (ZRI) covers 496 metro areas, and 57% of those metros reported yearly increases in rents in June. As a point of comparison, just about 72% of the metro areas covered by the ZHVI experienced yearly home worth increases. Nationally, rents increased 1.6% in June from year-ago levels, denoting a slowing. This is a significant annual decline in the rental appreciation rate from its peak appreciation of 6.2% nationally in September 2012.
This development mixed with rising home values is another contributor to investors exiting some markets as they had frequently bought for-sale inventory to convert them to for-rent properties. Markets that continue seeing highly robust year-over-year hire increases include Cincinnati (10.5%), Denver (5.5%) and Boston (4.3%).
Foreclosures
The rate of houses foreclosed continued to decrease in June with 4.96 out of each 10,000 homes in the country being liquidated through foreclosure. Nationally, foreclosure resales remain low, making up 9.53% of all sales in June, down 3.6 percentage points from Q2 of 2012, underlining the limited stockpile of foreclosure resales. For-sale inventory levels remain restricted, with lots of metro areas across the country having fewer for-sale lists available in June compared with last year, although constraints are starting to ease. The absence of foreclosure resales and normal for-sale inventory in numerous markets is contributing to home worth appreciation. In the second half of the year we are expecting continued easing with speculators beginning to slowly exit markets. As home values continue to climb.
Outlook
With the housing recovery in effect, many homeowners are feeling a feeling of whiplash after a period of depreciation, but this sort of market behavior will not last. Backers are beginning to pull out of some markets â€" as home values are climbing higher â€" and regular customers are coming back, now that they can be competitive again. Though, some purchasers are beginning to feel the reduction in purchasing power due to higher mortgage rates. More for-sale inventory is slowly but surely coming on line, as homes are liberated from negative equity and more homeowners are deciding to sell. Both of these developments will make a contribution to slowdowns in appreciation towards more tolerable rates.
The US ?housing market? As a whole is currently not experiencing a bubble, but in numerous places it may feel just like one, with some markets (Sacramento, Vegas, San Francisco) experiencing yearly home value appreciation approaching 30%. In some overheated markets, fast home value increases coupled with rising mortgage rates will lead on to housing prices and financing costs outpacing local earnings expansion, which may also contribute to a moderation of the market.
About the Author:
Marco Santarelli is an investor, author and founder of Norada Real Estate Investments â€" a nationwide real estate investment firm providing turnkey investment property in growth markets around the US. "State of the U.S. Housing Market" was originally published on the Real Estate Investing Blog.
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