Last month, as 2016 came to a close, US home values appreciated at their fastest pace since July 2006. But, despite home value increases seen over 2016, rent growth flattened, according to a new report by the online search portal Zillow.
Home values rose nearly 7 percent year-over-year and 0.6 percent from November to $193,800 in December, says data from the Zillow Home Value Index. December was the 53rd consecutive month of home value appreciation. While the annual pace of national home value appreciation “stabilized somewhat” at the end of 2015 and into 2016, it has accelerated in each of the past seven months compared to the month prior.
The national median home value is still below the all-time high of $196,600 recorded in April 2007. However, if growth remains steady going forward into 2017, those peaks “will be exceeded very soon.”
Home value growth in the bottom one-third of all homes, or starter homes, continued to outpace the top-third of the market, or “luxury” homes, in December. Home values rose in the bottom one-third just over 9 percent from last year. Meanwhile, it grew just over 5 percent year-over-year in the luxury market.
Home values in more than half of the metros studied in the December market report were currently growing at a faster pace than the previous year.
While home values have been accelerating as 2016 closed out, median rent prices flattened. The median national rent rose 1.5 percent from last year to $1,403 per month in December, according to the Zillow Rent Index. This was unchanged from November, and at $1,403 per month, national median rents were at exactly where they were in April 2016. In essence, during the final three quarters of 2016, rents flattened and home value growth accelerated, says Zillow.
Rental growth was the strongest in the Northwest in December, where it grew 8.4 percent year-over-year in Seattle, WA and 6.7 percent in Sacramento, CA. Meanwhile, it was the slowest in Pittsburgh, PA, where rents decreased nearly 2 percent from last year.
Renters may be feeling less pressure to buy a home as a result of the slowing rental growth, especially as home values rise. They might choose to remain renting a bit longer to either save more, or just wait for the right home to become available.
Interestingly, both Portland, OR and Seattle, WA each ranked in the top three for fastest-appreciating rents and home values.
Inventory remained an issue in much of the country in December. Inventory levels were 4.6 percent lower year-over-year last month. In fact, overall inventory has fallen year-over-year in each of the last 23 months, says Zillow. Starter homes were down by nearly 7 percent year-over-year in December, while the top-third of the market recorded a 2.4 percent decrease in inventory from last year.
“Home values ended 2016 growing at their fastest pace of the year, which could be an indication of what to expect in 2017,” said Zillow Chief Economist Dr. Svenja Gudell.
Gudell cited inventory as a major concern for this coming year. “Lack of available entry-level homes coupled with high demand will continue to rapidly drive up home values in the near future. Buyers should make sure they get pre-approved for a mortgage, and be prepared to move quickly, especially in hot markets like Seattle and Portland. It’s not uncommon for buyers to make at least two offers during their home search.”
Click here to read the entire report.