U.S. House Price Growth Likely to Rise by 3 Percent

According to an analysis of the latest data on homes for sale in the USA, local real estate markets in the U.S. are showing signs of a slowdown, but home values are still expected to rise by about 3.1 percent through August 2015. 

July and August have been the slowest months for home prices in the nation over the past year. The home value index published by Zillow increased by 6.6 percent in August to $175,600 but has only increased by 0.1 percent over the previous month. However, this trend is providing a better look at local markets for investors and other buyers and sellers.

homes for sale USAIt is now clear that the hottest markets in the country are on the West Coast. Homes are selling quickly up and down the coast even when the asking prices are high. Currently, the top markets are San Jose and San Francisco in California and Seattle, Washington.

In addition to the hot markets on the West Coast, other cities are claiming positions as the top markets to find bargain real estate. In Cleveland, Ohio; Philadelphia, Pennsylvania; and Providence, Rhode Island, the markets are still in recovery, but prices are just beginning to rebound.

Zillow’s analysis of homes for sale in the USA was broken into several different sections. One of these shows that sellers have the strongest negotiating power in California’s Bay Area, Seattle and Dallas, Texas. In these cities, most of the final sales prices are at or above the asking prices.

The most favorable markets for those looking to buy homes are in the Northeast and the Midwest. This is because these regions lack the fierce competition and bidding wars that can be found on the West Coast and in big cities.

It is important to understand, however, that Zillow defines a sellers’ market differently than most people do. It is commonly assumed that a sellers’ market is one in which home values are on the rise, but Zillow contends that in a true sellers’ market, homes stay on the market for shorter periods and sell at prices close to or above the asking prices.

In contrast, homes in a buyers’ market stay listed longer and sell at prices below what the owners are asking. Even though price cuts are often ignored in these equations, Zillow believes that they are extremely important.

The chief economist at Zillow, Stan Humphries, made a public statement concerning the recent analysis. “Real estate has always been local, but as we continue to put the housing recession further in the rearview mirror, the largely uniform performance of local markets is also fading,” said Humphries.

“We now have several different types of markets emerging, including markets that are still muddling along the bottom, markets that shot up immediately after the recession ended and are now cooling quickly and markets that are still very hot,” Humphries explained. “Each of these environments presents unique challenges and opportunities for buyers and sellers, and what works in one area won’t necessarily work in another.”

Home prices in the U.S. have continually increased on a monthly basis for more than two years. However, the appreciation of home values has slowed because so many properties have been listed for sale, and the number of homes on the market is still increasing. In August, Zillow reported that the quantity of properties for sale rose by 20.6 percent over the previous year and 2.1 percent over the previous month.

This latest report from Zillow comes on the heels of another national housing analysis conducted by S&P and Case-Shiller. At the end of July, the S&P/Case-Shiller property value index showed an increase of 6.7 percent over July 2013, which is the weakest gain in values since November 2012.

This slowdown has been attributed to investors stepping out of the market early and the low number of first-time home buyers. A senior U.S. economist for Barclays Capital, Michael Gapen, recently spoke about this issue.

“In order to support further gains in home prices, you would need stronger housing demand, an improvement in the rate of household formation and inventory levels to remain lean,” said Gapen. “You will get all of this. It will just be at a moderate pace since owners shouldn’t anticipate 8 percent to 10 percent out of a home forever.”

The S&P/Case-Shiller index is compiled from data obtained in 20 U.S. cities. Nineteen of those cities showed reduced gains. The biggest drop was in San Francisco while Cleveland, Ohio, was the only city to maintain its average gain.

Author: Gregory Bell

With over 38 years in the real estate industry, Gregory is a Director of the No. 1 office in the Ray White Group.

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