Zillow Group IR Blog

March 2019 Real Estate Market Report

Home Value Cooling Is More About Changes in Demand Than Supply

Home values are growing especially slowly in some markets that until recently were among the country’s hottest. While values in most major metros continue to climb, but slowly, an exception is pricey San Jose, Calif.: Its home values fell year-over-year in March for the first time in seven years, falling 0.2% from March 2018 (the median home in the San Jose area was worth $1,209,700 in March, down from $1,212,100 a year ago).

While long-term housing demand continues to look strong, we’re seeing our first set of significant local housing slowdowns since the nationwide downturn in 2007. Other formerly white-hot markets that are jamming on the brakes include: San Diego, where home values grew just 1.3% annually in March (down from 8.6% year-over-year growth in march 2018); San Francisco and Los Angeles, both growing at 2% year-over-year, down from 9.5% and 7.6% last year; and Seattle,  growing at a 2.6% annual pace, from 11.8% a year ago. Judging by their trajectory, it is possible home value appreciation will continue to soften and go temporarily negative in these markets as well.

It’s not surprising that the total inventory of homes available for sale during the month is simultaneously climbing. March was the seventh consecutive month of year-over-year inventory gains—the first time that’s happened since 2014.

However, these sister trends—home values falling and overall inventory climbing—are not a result of builders or homeowners putting more houses on the market, although it may feel that way to new buyers checking on available listings and seeing more from which to choose.

In fact, for the past four months, new for-sale inventory – the number of homes listed in a given month that were not on the market during the previous month – has fallen on an annual basis. In March, there were 6.1% fewer new listings than in March 2018; in February, 7.7% fewer; in January, 3.6% fewer; and in December, 2.8% fewer.

Although there have been months with annual increases—notably October, when new listings rose 13.4% from a year earlier—the trend is downward, a sign that even sellers are retreating from the housing market.

Without an influx of new listings, the boost in total inventory has been largely a result of changing demand:

  • Buyers are more willing to wait: February was the first month in four years (since February 2015) that the average number of days listings are on the market has risen. In February, listings nationally were on the market for an average of 96 days, up from 92 days a year earlier.
  • They’re also less willing to pay sellers’ asking prices: In March, 14.6% of listings had a price cut, up from 12.7% in March 2018.

This kind of slowdown story is typified by markets like Sacramento, Chicago, Riverside, Calif., Tampa, Fla., Dallas-Fort Worth,  and Los Angeles—major metro areas where home value appreciation is significantly slower this year than last and overall inventory is up despite a drop in the number of new listings this March versus last March.

Slowdowns driven by an influx of new supply can be welcome news for certain types of housing markets, like rain after a long drought. And there are metros having that kind of breather–San Jose and Seattle, the two metro areas with the most abrupt slowdown in home value appreciation, are experiencing swells in overall inventory bolstered at least in part by increases in new listings. Denver, Boston, Detroit, and San Antonio have similar profiles, but with more gradual softening in price growth.

The Atlanta metro is an odd exception. Like the above, overall inventory and new listings are significantly higher, up 13.8% and 14.8% respectively, yet home value appreciation remains on par with last year, growing in the double digits.

On the other end of the spectrum, Indianapolis, Virginia Beach, and Austin continue to experience both increasing appreciation and declining inventories—a good reminder that the national trend no longer typifies all markets’ experience.

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Non-coastal metros take off

While expensive coastal markets experience a home-value slowdown, values in inland markets including Indianapolis, Atlanta and Las Vegas are posting double-digit growth. Annual growth in Indianapolis has been climbing in the double digits for eight months, and rose 12.8% in March to $167,000, the fastest of any major market. Atlanta’s median home value grew 10.7% in March to $220,000, which puts it just shy of the $226,700 national median. And Las Vegas posted 10% median home value growth in March to reach $280,600. While most major metros have by now reclaimed their housing bubble peaks, it will still be a while before Las Vegas reclaims its June 2006 peak of $316,800.

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Rents keep climbing

The median rent nationwide rose 2.5% ($36) in March to $1,474 a month. Among major metros, rents climbed fastest year-over-year in Las Vegas, where they rose 7.6% ($98) to $1,396; Phoenix, where they were up 6.7% ($91) to $1,446; and Orlando, Fla., where they grew 6.5% ($93) to $1,531.

Rents rose 2% or less in nine of the 35 largest metro areas. Baltimore grew the slowest, climbing 1% from March 2018 ($18) to $1,753. It was followed by San Jose, Calif., and the New York metro area, where rents rose just 1.5 percent from a year ago (to $3,553 in San Jose and $2,419 in New York).

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