Home-Price Appreciation Rates Ease Up … Mostly

The Zillow Home Value Index (ZHVI) rose to $157,600 as of the end of the first quarter, up 5.1% year-over-year and 0.5% from the fourth quarter of 2012, according to the first-quarter 2013 Zillow Real Estate Market Reports.

In March, U.S. home values rose for the 16th consecutive month, though last month represented the second straight month of slowing annual appreciation. Underscoring this slowdown, home value appreciation in the first quarter was 0.5% compared to 2.1% in the fourth quarter of 2012.

Historically, housing markets can expect annual home value appreciation of roughly 3%, according to Zillow research. Looking ahead, the Zillow Home Value Forecast shows national home values increasing by 3.2% through March 2014 – an annual appreciation rate more in line with historic norms.

But in some local markets, home values continue to rise quickly. Five metros covered by Zillow experienced year-over-year appreciation of more than 20%: Phoenix (up 24%), Las Vegas (up 22.3%), San Jose (up 22.1%), San Francisco (up 21.4%) and Sacramento (up 20.1%).

‘Looking forward, we expect annual home value appreciation to continue to slow, as more inventory comes up for sale,’ says Zillow Chief Economist Dr. Stan Humphries. ‘But pockets of very rapid appreciation will remain – a troubling sign of volatility and a potential future headache as affordability is compromised and homes begin to look much more expensive to average buyers. This affordability issue may become acute in many markets in a couple years once mortgage rates begin to return again to normal levels.’

Seven of the top 30 metro markets covered by Zillow saw a decline in home values in the first quarter. The New York metro saw a decline of 0.3% in home values after three consecutive quarters of positive appreciation – the first quarterly decline in that metro since the first quarter of 2012. Chicago saw the greatest home value depreciation, with values falling 1.4% in the quarter after a flat fourth quarter of 2012.


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