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While national home price growth remained strong in July, price growth decelerated sharply in many of the country’s hottest housing markets, according to a report released yesterday by the listing site Zillow.

Despite slowing home price growth in two-thirds of the largest markets, limited availability of homes for sale continues to make the market challenging for buyers.

“Steadily rising mortgage interest rates and rapid home price appreciation, coupled with slow wage growth, means many markets are beginning to feel an affordability squeeze, especially some of the nation’s priciest markets,” Aaron Terrazas, Zillow senior economist, tells Livabl.

Over the last year, national home prices rose 8 percent to a median value of $218,000 in July — the highest value ever recorded. July’s pace was 0.7 percentage points faster than last year.

Yet, annual price appreciation slowed in 20 of the 35 largest housing markets in July.

Last year, Seattle, Washington led the nation in home-value growth. This year it was the 12th fastest-appreciating market and recorded the largest slow down over the past year.

Seattle home prices grew at a pace 5 percentage points slower compared to last year at the same time.

“Despite the slowdown, home value appreciation is still far outpacing its historic pace, and there is still plenty of demand from buyers and limited supply, keeping upward pressure on the market,” says Terrazas.

And, while price appreciation is slowing in the majority of the largest markets, the current pace is still higher than historical norms in all but four of the markets analyzed by Zillow.

In Tampa, Florida — where price growth slowed significantly over the last year — home prices were up over 10 percent annually. The historic annual pace is slightly over 5 percent for the area, while nationally the historic average is 3.7 percent.

Inventory has fallen annually nationwide for the last 42 consecutive months, exacerbating affordability challenges for many homebuyers — especially first-time buyers.

“Roughly half of all homes available for sale are in the top-third of the market, so even as things may slow down at the upper reaches of the market, competition will remain fierce among entry-level buyers,” says Terrazas.

And even as annual price growth begins to weaken, it’s still very much a seller’s market and likely to remain one for some time.

“The most pressing factor keeping the market firmly in the hands of sellers is incredibly limited inventory, so even when inventory starts to rise, it comes back from a very low base. It’s likely to take many more years before buyers have the kind of choice in the market that will enable them to take back meaningfully more control,” says Terrazas.

Click here to read the entire report.

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