August in the housing market remained steady as warm breeze, with inventory tight and house prices growing slowly, Zillow reported Thursday. For the 49th month in a row, in fact, the median U.S. home value rose year-over-year in August, to $188,100. That’s up a really modest 0.4 percent, but up 5 percent from August 2015, according to Zillow’s August Real Estate Market Report.
“In each month thus far in 2016,” the report stated, “annual home value growth has been no slower than 5 percent per year, and no faster than 5.2 percent – a notable stretch of consistency.”
According to Zillow’s chief economist, Svenja Gudell, the steady appreciation of the U.S. housing market began two years ago.
“Throughout much of 2015, home values grew in a similarly narrow range, between 4.4 percent and 4.7 percent annual growth, before accelerating into the 5 percent range at the end of last year‒‒where it has largely stayed since,” Gudell said. “This long period of steady annual home value growth almost looks like an anomaly when seen next to the sometimes wild up and down swings experienced nationwide over the past two decades.”
A potential answer for why the market has been so stable, she said, may just come down to those three famous needs for success in real estate: location, location, location.
“The U.S. housing market is really a collection of dozens of local markets, each behaving differently and with their own unique fundamentals,” Gudell said. For example, “some once-red-hot markets, including the San Francisco Bay Area, have cooled considerably this year.”
According to Zillow, values in San Francisco and San Jose metro areas dropped from a more than 11 percent annual pace in January to 6 percent in August. At the same time, home value growth in other markets like the booming Pacific Northwest has picked up. Seattle and Portland have both increased by more than a full percent each this year.
Home price growth, however, is bigger at the bottom, Zillow reported.
“Annual home value growth at the bottom end of the market continues to far exceed growth at the top end,” the report stated. “In August, the typical U.S. home valued in the bottom one-third of all homes was worth $106,200, up 7.3 percent from August 2015. The typical home valued in the top one-third was worth $342,600, up 3.8 percent year-over-year.”
Inventory remains well below peak levels from a few years ago in every large market.
“A big driver of faster home value growth overall among more entry-level homes is a lack of such homes to buy relative to the most expensive homes,” Gudell said.
Nationwide, inventory of bottom-third homes available for sale in August was down by 9.2 percent annually, compared to a smaller 1.8 percent annual decline in the number of top-third homes available, the report stated.