US housing recovery steps up a gear latest index shows
The national housing recovery in the United States has kicked into higher gear in the second quarter of 2013 after a relatively slow start to the year, the latest index shows. Home value appreciation spread and accelerated according to the second quarter Zillow Real Estate Market Report as its index rose to $161,100, up 5.8% year on year and 2.4% from the first quarter.
It is the largest annual gain since August 2006 and largest quarterly gain since the fourth quarter of 2005, Zillow senior economist Svenja Gudell pointed out. National home values rose just 0.25% during the first quarter but the 2.4% quarterly rise in the second quarter was the sixth straight quarter of appreciation and represents the largest second quarter gain since 2004. Not only did the pace of home value appreciation quicken in the second quarter, but the recovery also fully took hold nationwide. Markets in some areas of the Northeast, Midwest and Southeast that had previously been slow to turn the corner began to appreciate, which helped boost the overall national market.
Indeed, all of the top 30 largest metro areas covered by Zillow experienced annual appreciation as of the end of the second quarter, and all have hit their bottom. Metros with the largest annual gains in the second quarter included Sacramento up 29.5%, Las Vegas up 29.4% and San Francisco up 25.5%.
Home values are expected to rise another 5% over the next 12 months, according to the Zillow Home Value Forecast. Of the 30 largest metro areas, 29 are expected to show home value appreciation in the next year, with only the New York metro expected to fall, by around 0.8. Metros expected to see the highest appreciation rates through to June 2014 include Sacramento with an increase of 18.9%, Riverside in California 16.6% and Phoenix 11%.
However, as home values continue to rise along with mortgage interest rates, and different kinds of buyers and sellers enter and exit the market, the landscape will change, according to Gudell. ‘The US housing market as a whole is currently not experiencing a bubble, but in many places it sure must feel like one, with some markets experiencing annual home value appreciation approaching 30%. Home owners are feeling a sense of whiplash after years of depreciation, but this kind of market behaviour won’t last,’ she explained.
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‘Investors are starting to pull out of some markets and regular buyers are coming back, and more inventory is slowly but surely coming on line, both of which will contribute to slowdowns in appreciation,’ Gudell added. ‘Additionally, in some overheated markets, rapid home value increases coupled with rising mortgage rates will lead to housing prices and financing costs outpacing local income growth, which will also contribute to a moderation of the market. Combined, all of these factors will help the market in the second half of 2013 and beyond normalize and become much more steady than it has been in these past six months,’ she concluded.
In the rental market, national rents fell in the second quarter compared with the first quarter by 0.5% to a Zillow Rent Index of $1,282, the first quarterly decline after nine consecutive quarters either increasing or remaining flat. Year on year, national rents rose 1.6% as of the end of the second quarter. Foreclosure rates also fell in the second quarter compared with the first quarter. A total of 4.96 out of every 10,000 homes nationwide were foreclosed upon in the second quarter, down 0.7 homes per 10,000 from the first quarter and down 1.6 homes per 10,000 year on year.