Amid Steady U.S. Growth in 2018, Some Markets Flagged While Others Flew (December 2018 Market Report)

• Home value appreciation was slower in December than it was a year ago in 19 of the 35 largest housing markets.
• The typical U.S. home is worth $223,900, 7.6 percent more than it was a year ago.
• The median rent increased 1.4 percent over the past year, the biggest annual increase since June 2018.
• Inventory declined 0.4 percent after three straight months of annual increases.

As the saying goes, "all real estate is local." So while a peek at national home value appreciation rates may not reveal much change over the course of 2018, a closer look at local conditions in the nation's largest markets shows a sometimes significant slowdown in growth in a majority of them.

Overall, the median U.S. home grew 7.6 percent in value year-over-year in December 2018, to $223,900 according to the December 2018 Zillow Real Estate Market Report – annual growth that is actually a hair faster than that recorded in December 2017 (7.4 percent). Annual home value growth nationwide was fairly steady in 2018, ranging from a low of 7.5 percent in January to a high of 7.9 percent in March – the traditional start of the spring home shopping season.

But locally, annual home value growth slowed between the end of 2017 and the end of 2018 in 19 of the nation's 35 largest markets. And in some cases, the slowdown was fairly dramatic – median home value growth slowed by 3 percentage points or more by the end of 2018 compared to the end of 2017 in five major markets: Seattle (from 12.4 percent to 5 percent, a change of -7.4 percentage points), San Jose (16.8 percent to 9.9 percent, -6.9 percentage points), Philadelphia (7 percent to 3.6 percent, -3.4 percentage points), Sacramento (8.1 percent to 4.8 percent, -3.3 percentage points) and Los Angeles (6.9 percent to 3.9 percent, -3.1 percentage points).

And as growth in San Jose and Seattle in particular cooled, so too did their rankings in the national list of fastest-growing large markets – a year ago, San Jose was the fastest-growing of the top 35 markets nationwide, and Seattle was third. By the end of last month, San Jose had fallen to eight on the list, while Seattle's growth rate put it at 28 out of the 35 largest markets.

But even as home value growth in some cities cooled considerably throughout 2018, others – especially traditionally more-affordable markets in the South and Midwest – heated up. Home value growth accelerated year-over-year in December 2018 compared to December 2017 in 16 of the nation's 35 largest markets. The annual pace of growth rose the most in Indianapolis (from 5.9 percent to 12.8 percent, a change of 6.8 percentage points), Atlanta (8.1 percent to 13.2 percent, 5.1 percentage points), Houston (3.9 percent to 6.8 percent, 2.9 percentage points), Charlotte (8.5 percent to 11.2 percent, 2.6 percentage points) and Cincinnati (6.2 percent to 8.1 percent, 1.9 percentage points).

The median rent increased 1.4 percent from the previous December to a Zillow Rent Index of $1,460. This was the biggest annual increase in rents since June 2018. Orlando rents saw the biggest jump, up 6.4 percent over the past year to $1,496. Rents fell 1.3 percent in Portland, Oregon.

Inventory fell slightly over the past year, down 0.4 percent since December 2017. This came after three consecutive months of gains in the number of homes for sale, suggesting that national sustained inventory growth is not here yet. Still, several major markets that were starved for homes for sale are seeing big gains, led by San Jose (up 47.6 percent), Seattle (up 32.9 percent) and San Diego (up 32.2 percent).

Mortgage rates on Zillow ended December at 4.30 percent, which was also the lowest rate of the month[i]. Rates were highest at the beginning of the month[ii], at 4.56 percent. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.

 

[i] Rates also hit 4.30 percent on December 27

[ii] December 3, 2018

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