National home values rose again in May, climbing 0.5 percent from April to a Zillow Home Value Index of $159,000, according to the May Zillow Real Estate Market Reports. Home values were up 5.4 percent year-over-year in May, the second-highest annual rate of national appreciation registered in the past 12 months. The 5.4 percent annual gain in May was exceeded in the past year only by January's 5.6 percent year-over-year increase. Home values have risen or remained flat month-over-month for 19 straight months. The last time home values rose to approximately this level was July 2004.
A majority (50.8 percent) of the 360 metros covered experienced home value appreciation between April and May. Among the 30 largest metro areas covered by Zillow, Sacramento experienced the largest monthly increase, with values rising 1.7 percent. Other large metro areas with notable monthly increases include Las Vegas (1.3 percent) and Los Angeles (1 percent).
For the 12-month period from May 2013 to May 2014, U.S. home values are expected to rise 4.1 percent to approximately $165,448, according to the Zillow Home Value Forecast. The pace of home value appreciation nationwide and in many local markets is expected to moderate as more sellers enter the market and builders begin construction on more new homes, helping ease the supply crunch that has so far contributed heavily to rapid home value appreciation.
"Enjoy it while it lasts, because the housing market will undoubtedly look very different a few years down the road from how it appears now. Inventory constraints are beginning to ease in many areas as more listings and new homes come on line, which will ultimately help end this period of rapid annual home value appreciation above 5 percent. Additionally, as interest rates begin to rise from their historic lows, some demand may also ebb from the market as home purchases become more expensive to finance," said Zillow Chief Economist Dr. Stan Humphries. "While we believe the housing recovery will remain strong, home value appreciation will slow down, and buyers in it for the short term could get burned if they assume home values will continue rising as they have unabated. A home should always be looked at as a longer-term purchase, which will help cushion homeowners against volatile short-term swings in value."
Of the nation's 30 largest metro areas covered by Zillow, 29 experienced year-over-year home value increases in May, with half up by double-digit percentages. Major markets where home values increased the most over the past year include Las Vegas (28 percent), Sacramento, Calif. (26.1 percent), San Francisco (24.2 percent), San Jose, Calif. (21.8 percent) and Phoenix (21.3 percent). St. Louis was the only metro area in the top 30 where home values declined year-over-year.
National rents declined slightly in May compared with April, down 0.1 percent to a Zillow Rent Indexiv of $1,286. Year-over-year, national rents were up 2.6 percent in May.
The number of completed home foreclosures in May fell to 5.01 homes foreclosed out of every 10,000 homes nationwide, down 0.4 homes per 10,000 from April and 1.4 homes per 10,000 from May 2012. This is the lowest monthly level of foreclosure liquidations since October 2007. Foreclosure resales represented 10.7 percent of homes sold in May, down 1.1 percentage points from April and 3.8 percentage points from May 2012.