JAN 22, 2013 1:05pm ET

Zillow: Home Values Up 5.9%, But Growth Likely Unsustainable

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National home values finished 2012 with the largest annual gain in six years since the peak of the housing bubble, according to real estate information provider Zillow.

Through the end of 2012, home values were up 5.9% over the previous year, with the index rising to $157,400.

The Seattle-based company said home price appreciation for housing markets is typically 3%, so the odds of this trend continuing at such a favorable pace is highly unlikely.

“We expected 2012 to be a good year for housing, and it delivered in spades,” said Stan Humphries, chief economist for Zillow. “Strong demand paired with limited inventory in many markets helped fuel a robust and often rapid recovery in overall home values, good news for homeowners after years of poor performance.”

Humphries anticipates the housing recovery to continue in 2013, but at a more sustainable pace of 3.3%, which is around the average appreciation rate.   

Home value increases were widespread last year, with growth appreciation rates ranging from a high of 22.5% in Phoenix to a low of 0.2% depreciation in both Cincinnati and Chicago. Furthermore, seven of the top 30 top cities posted home price surges of 10% or more.

Additionally, 254 of the 366 (69%) total metropolitans analyzed by Zillow posted larger home price gains over the prior year.

Rental housing units also were up 4.2% last year with an index of $1,274 at the end of December.

“It’s important to be cautious moving forward, even as we celebrate the undeniably positive end to 2012, and be careful that consumers don’t grow to expect such high appreciation as the norm,” Humphries added. “Buying a home should be a long-term decision, and these swings between a deep housing recession and higher-than-normal appreciation rates can give consumers whiplash and cause some to lose sight of that.”

 

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