Zillow Group IR Blog

June 2019 Real Estate Market Report

U.S. Rent Growth Accelerates as Home Values Stabilize

  • Rents grew for the ninth straight month, and are now up 3% year-over-year. The median monthly rent in the U.S. is $1,483.
  • Home values grew 5.2% year-over-year, down from 7.6% annual growth at this time last year.
  • For-sale inventory in the U.S. fell 0.8% annually. There are 12,128 fewer homes for sale than in June 2018.

A surge in new apartment supply over the past few years that temporarily muted rent growth for much of 2018 has seemingly been fully digested by the market, with rent growth re-accelerating throughout the first half of 2019.

The median U.S. rent rose 3% in June from a year ago, to $1483/month, according to the June Zillow Real Estate Market Report. Rent was up year-over-year in 49 of the nation’s top 50 markets (Milwaukee is the only exception) and is growing faster than a year ago in 43 of those 50 markets. Among those 50 large markets, annual rent growth was fastest in Las Vegas (up 10%), Phoenix (8.4%), Orlando (7.4%), Jacksonville (6.6%) and Riverside (6.3%).

Annual U.S. rent growth hasn’t been at 3% since early 2016, when pent-up pressure in the rental market after a year of breakneck rental appreciation spurred record numbers of multi-family building permits. Much of that new rental supply tended to be concentrated in large apartment buildings in dense downtowns and was generally of similar (largely above-average) quality. Many of these newer properties competed with one another on price during their initial lease-up periods, muting rent growth throughout much of 2017 and 2018 as they began to open en masse.

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The annual pace of rent growth turned negative (rents fell slightly year-over-year) for a brief two-month stretch in September and October 2018 as the market absorbed the new supply. But that absorption process seems to be ending, and demand from renters – both from existing tenants content to stay in their units and from younger, would-be tenants beginning to strike out on their own – remains strong. After that brief slowdown, annual rent growth has accelerated in each of the past nine months compared to the month prior.

Home Value Growth Cooling, Normalizing

But as rent growth has strengthened, home value growth has continued the gradual slowdown that has marked the for-sale market since the beginning of the year. The median U.S. home value grew 5.2% year-over-year in June, to $227,700 – down markedly from 8.1% annual growth in January, but still a healthy pace that is well-above historic averages. After a slight (-0.1%) monthly decline in April – the first monthly dip in more than seven years (February 2012) – monthly home value growth resumed in May and June, and home values have recovered all losses. The very brief monthly decline and small monthly gains that followed are less-indicative of a market about to enter a prolonged downturn, and more in line with a market that is slowly normalizing and slowing to a more sustainable pace of growth after several years of very rapid appreciation.

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Annual home value growth slowed over the past year in 42 of the nation’s 50 largest housing markets. The large markets in which home value growth slowed the most in June were San Jose, Seattle, San Francisco, Las Vegas and Dallas. All eight large markets in which home value growth accelerated over the past year – New Orleans, Birmingham, Oklahoma City, Raleigh, Cincinnati, Milwaukee, Indianapolis and Louisville – are notable for their relative affordability compared to their peer markets. In six of those eight accelerating markets, median home values are lower than the national median (Milwaukee and Raleigh are the exceptions).

Low Inventory Expected to Remain a Persistent Problem

The number of homes for sale nationwide fell 0.8% in June compared to a year ago, and was down 1.2% from May. After a six-month stretch of modest annual growth spanning the end of 2018/beginning of 2019 – a growth spurt that ended an uninterrupted, 56-month streak of annual inventory declines – the number of homes for sale nationwide has fallen year-over-year in each of the past four months. Inventory was up in a small majority (26/50) large markets, and grew the most in Las Vegas (up 54.3% year-over-year), San Jose (37.2%), Salt Lake City (21.3%), San Francisco (20.8%) and Denver (20.4%).

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After years of declines, inventory appears to have largely hit bottom, but not yet begun to rebound in earnest. Instead of moving decisively in one direction or another, over the past 8-12 months inventory has been bouncing up and down by small amounts. We expect this to continue in the near term as the market grapples with a number of difficult-to-solve inventory challenges that are helping keep inventory low, including (but not limited to):

  • Lackluster new construction activity, as builders struggle with scarce land, expensive labor and volatile materials costs.
  • Little long-term movement in the number of fresh listings hitting the market each month.
  • A surge in the popularity of renting single-family homes, particularly among institutional investors that buy and keep these homes as rentals when they might otherwise enter the market as fresh for-sale inventory.

Check out Zillow Research for a closer look at the economy through the lens of the housing market.

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