Over the past year, the national housing market has rebounded strongly with largely unsustainable home price appreciation. But according to a Zillow real estate market report, a slowdown has started to take place for home values through the first quarter of 2013.
The Seattle-based analytic firm’s Zillow Home Value Index rose to $157,600 at the end of the 1Q, up 5.1% year-over-year. In March, national home prices increased for the 16th consecutive month, but the latest numbers represented the second straight month values fell on an annual basis.
More evidence from Zillow underscoring the overall slowdown is that home price appreciation in the first quarter was 0.5% compared to 2.1% in the previous quarter.
“The sometimes dramatic home value run-ups experienced over the past year were never expected to be sustainable, and recent slowdowns are indicative of a market that is slowly finding its natural level,” said Stan Humphries, chief economist for Zillow. “Looking forward, we expect annual home value appreciation to continue to slow as more inventory comes up for sale.”
Through March 2014, Zillow is forecasting national home values to rise by 3.2%, an annual appreciation rate that is more in line with historic norms.
Despite the firm predicting more stable home prices across the country in the future, there is still the likelihood that some metropolitan areas will continue to experience robust home value increases.
For example, in March, five metros covered by Zillow saw appreciation on a yearly basis of more than 20%, including Phoenix (up 24%), Las Vegas (22.3%), San Jose (22.1%), San Francisco (21.4%) and Sacramento (20.1%).
However, seven of the top 30 metro markets saw a decline in home values in the first quarter, such as New York which experienced a 0.3% drop after three consecutive quarters of appreciation. Chicago had the greatest home price depreciation with housing units descending about 1.4% during the first three months of 2013.
“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,” Humphries added. “This affordability issue may become acute in many markets in a couple years once mortgage rates begin to return again to normal levels.”