Although home prices were up on an annual basis in October, national home values fell for the second month in a row and are expected to slow down in the coming year.
Home values rose nationwide 5.2% year-over-year in October, a slower pace than annual appreciate rates in the 7% range experienced during the summer, which Zilllow notes is further proof that the market has begun to “cool off.”
Despite the annual increase, October marked the second consecutive months where national home values declined to a Zillow Home Value Index reading of $162,800—the first consecutive monthly decline since October 2011, according to the October Zillow Real Estate Market Reports.
Evidence that the market is beginning to “cool off” is furthered by half of the 388 metros covered by Zillow reporting monthly home value depreciation in October from September. Additionally, 10 of the 30 largest metros exhibited by Zillow reported monthly home value declines in October.
While the months-long period of home value appreciation in the range of 6% to 7% was good while it lasted, it would not continue indefinitely, said Chief Economist Stan Humphries.
“The conditions that led to the robust appreciation experienced earlier this year, including historically low mortgage interest rates, high affordability, low inventory and high demand, are waning,” said Humphries. “In their place, we’re beginning to see more inventory and rising mortgage rates, which will lead to further normalization in the market going forward.”
For the 12-month period from October 2013 to October 2014, Zillow expects national home values to rise just 2.7%, according to the Zillow Home Value Forecast.
Seven of the top 30 metros are also expected to experience value depreciation over the next year, with the biggest declines in St. Louis (-1.5%), Philadelphia (-0.9%) and New York (-0.7%).
Written by Jason Oliva