The housing market has seen record-breaking growth since June, further cementing its strength amid an uncertain economy, according to the latest Zillow® Real Estate Market Report1.
The typical home value rose to $259,906 in September. That incredible growth includes:
Add to that recent data showing double-digit annual growth in both list and sale prices and a clear picture emerges, showing how this summer’s extreme lack of inventory and incredible demand have stoked the flames of a hot housing market to impressive new heights. Zillow’s updated forecast expecting 7% growth in the coming year shows that heat will continue for some time.
“Home values are accelerating more quickly than any time since 2014, marking a sharp turnaround from a market briefly put on hold during the outbreak of the pandemic this spring,” said Zillow senior economist Jeff Tucker. “The historic shortage of homes available for sale has boosted home price appreciation, now that buyers are waging bidding wars for the few options left. Builders are racing to fill the gap, and we may see more listings next year if nervous sellers become reassured, but this shortage of homes is so deep that any reversal would take at least several months.”
For the third consecutive month, home values have risen in every major U.S. metro compared to the month prior. September increases ranged from 0.5% in Orlando to 1.5% in San Jose. Yearly growth was fastest in Phoenix, where home values were up 11.7% since this time in 2019. San Jose was hot on its heels at 11.5%, and Seattle stayed in third, hitting double digit growth (10.7%) for the first time since August 2018.
Median list price nationally is up 11.6% year-over-year as of the week ending Oct. 10. Beyond high demand and limited supply, two intertwined factors contribute to that recent spike: (i) sale prices for the most expensive homes are accelerating faster than sales price for less expensive homes; and (ii) the most expensive homes are sitting on the market longer than less expensive homes. Still, sale prices are more than keeping up — median sale price was 10.2% above last year in the week ending Aug. 29 (the most recent data available), while median list price was up 9.1% at that time.
Zillow economists’ forecast suggests home sales reached a recent high point in September and will experience a temporary slowdown in the coming months. Seasonally adjusted final home sales are expected to retreat to pre-pandemic levels by January before resuming growth in the spring, then stay firmly above pre-pandemic volume through most of 2021.
An even more optimistic forecast predicts home values will continue accelerating in the coming months. Zillow predicts seasonally adjusted home values to increase 2.9% more through the end of 2020 and rise 7% in the next year. Prior forecasts called for a 4.8% rise through next year.
Typical U.S. rents were $1,756 in September, up 0.9% annually and slightly above August’s rate after falling from 4% annual growth in February. Still, annual rent growth is at the second-lowest pace since at least 2015, when Zillow’s rent index began. Rents dropped only slightly in September, falling 0.1% month over month to after sustaining a 0.5% monthly decline in August.
Rent erosion continued in the metros with the highest rents, falling 6% since 2019 in New York, 5.9% in San Francisco and 4.5% in San Jose. The three largest monthly drops were seen in Boston (-2.1%), San Francisco (-2.1%), and New York (-1.8%). Meanwhile, rents continued to rise across much of the Midwest and Sun Belt. The highest annual growth was seen in Memphis (8.7%), Phoenix (7%), and Riverside (6.9%).
The most recent weekly housing statistics for the week ending Oct. 10 take trends seen since early summer to new, remarkable heights. For-sale inventory fell 1.2% week over week and is now down 36.4% since last year, while median list prices rose 0.2% since the previous week and are now 11.6% above their level at this point in 2019.