U.S. home values ended 2012 up 5.9 percent over the end of 2011, marking four consecutive quarters of national home value appreciation. The Zillow Home Value Index (ZHVI) rose to $157,400 in the fourth quarter, up 2.5 percent over the third quarter, according to the fourth quarter Zillow Real Estate Market Reports. The 5.9 percent annual appreciation rate far exceeded yearly rates of appreciation typically associated with healthy markets and represents the largest annual gain since August, 2006–near the peak of the housing bubble. Historically, housing markets can expect annual home value appreciation of roughly 3 percent on average, according to Zillow research.
Looking ahead, the Zillow Home Value Forecast shows home values increasing by 3.3 percent in 2013, a yearly appreciation rate more in line with historic norms.
Home value appreciation was widespread last year. Of the 30 largest metros covered by this report, only Cincinnati and Chicago failed to show annual and quarterly increases in the fourth quarter. Of the 366 total metro areas analyzed, 254–or 69 percent–registered annual home value gains in 2012; 278 metros experienced quarter-over-quarter home value appreciation.
Annual home value growth rates varied widely among the nation's 30 largest metros, underlining the uneven recovery the housing market is experiencing. Growth rates ranged from a high of 22.5 percent year-over-year appreciation in Phoenix to a low of 0.2 percent depreciation in Cincinnati and Chicago. Seven of the top 30 metros registered annual home value increases of 10 percent or more.
"We expected 2012 to be a good year for housing, and it delivered in spades. Strong demand paired with limited inventory in many markets helped fuel a robust and often rapid recovery in overall home values, good news for homeowners after years of poor performance. We expect this recovery to continue into 2013, but at a more sustainable pace," said Zillow Chief Economist Dr. Stan Humphries. "It's important to be cautious moving forward, even as we celebrate the undeniably positive end to 2012, and be careful that consumers don't grow to expect such high appreciation as the norm. Buying a home should be a long-term decision, and these swings between a deep housing recession and higher-than-normal appreciation rates can give consumers whiplash and cause some to lose sight of that."
As home values rose in the fourth quarter, foreclosure activity abated, with 5.22 of every 10,000 homes nationwide facing foreclosure during December 2012. That was down 2.2 homes per 10,000 year-over-year and down 1.2 homes from the previous quarter. Foreclosure re-sales stood at 12 percent of the market, down four percent from the end of 2011 and down 0.3 percent from the third quarter.
In the rental market, national rents fell 0.6 percent in the fourth quarter compared with the third quarter, but ended 2012 up 4.2 percent year-over-year. The Zillow Rent Index (ZRI) stood at $1,274 at the end of December.