National home values rose by 6.8 percent over the course of 2016, according to the latest Zillow Home Value Index (ZHVI), putting December 2016 home values just below the highest value ever, set in April 2007. Zillow economists speculated home values would continue to rise in 2017, but added that rents are likely to flatten out over the course of the next 12 months. This could give renters the wiggle room they need to search for the right home, the analysts added.
“Home values ended 2016 growing at their fastest pace of the year,” observed Zillow’s chief economist, Svenja Gudell. She warned that lack of inventory would remain a “major concern” for many homebuyers in 2017 and suggested that getting pre-approved for mortgages in hot markets could help buyers move quickly to snag available properties.
In Portland, Oregon, home prices continued to drive upward, thanks to that lack of inventory. Home values in that city were up nearly 14 percent over 2015, and Gudell noted that it is “not uncommon” right now for buyers to make “at least two offers during their home search” not just in Portland, but in Seattle as well.
If you’re watching rental rate trends with a wary eye, then you may be relieved to see that West Coast rents, while still dramatically higher than most of the rest of the country, appear to be stabilizing. They “only” rose 8.4 percent in Seattle, and nationwide rent appreciation has stabilized at 1.5 percent annual growth. This is just under half the pace of rental growth in 2015. National median monthly rent payments are still high, however, at $1,403.
Some cities back east posted serious inventory shortages that have affected rents and home values substantially. New York and Northern New Jersey, for example, have 9 percent fewer homes on the market now than they did 12 months ago. Rents in these areas are averaging $2,393 per month and home values have risen 6.3 percent to $402,700. Philadelphia has more than 12 percent fewer homes available and shows a 4.6 percent home value increase and monthly rents of $1,573. Washington, D.C., has nearly 14 percent fewer homes available with home values hovering around $380,200 and monthly rents of $2,122. In the Midwest, Columbus, Ohio, and Indianapolis, Indiana, both posted double-digit losses in inventory and the associated rental and home-value gains.
Not surprisingly, markets with shortages in housing are likely to continue to be “hot” in 2017, but keep an eye out for overdevelopment and for potential housing bubbles. As more home buyers opt to pay higher amounts for housing and possibly decide to bank on the appreciation that often comes with a housing inventory issue, as those shortages begin to ease (housing production was up 11.3 percent in December according to the U.S. Commerce Department), prices could begin to plateau. According to Realtor.com, Seattle, Washington; Eugene, Oregon; Grand Rapids, Michigan; Buffalo, New York; and Fort Wayne, Indiana, have the tightest inventories in the country at this time. Analysts at the website noted that high prices in areas like San Francisco kept some cities famous for housing shortages off the list because owners opt to sell in order to cash in on high prices. In that instance, prices may remain high but inventory constrictions moderate.
You can read more of Carole VanSickle Ellis’ coverage of this and other topics at Self-Directed Investor News!
About the Author
Carole VanSickle Ellis is the host of Real Estate Investing Today, a daily nine-minute investing podcast, and the editor of the Bryan Ellis Investing Letter. Contact her at firstname.lastname@example.org or visit www.selfdirectedinvestor.org.