Much of the upward price movement is rooted in major West Coast markets, most notably in Seattle with a 12.4 percent year-over-year spike in home prices and in San Jose with a 10 percent increase. Rental prices are also up, with September’s median rental price rising two percent year-over-year to reach $1,430 per month. West Coast rental prices are also rising quickly, with Riverside, Calif., reporting a six percent year-over-year spike and Seattle recording a 5.5 percent year-over-year increase.
"In these West Coast markets, heightened demand is being met with limited supply of homes for sale, which naturally causes prices to rise," said Zillow Chief Economist Svenja Gudell. "That limited supply and high demand dynamic is a widespread phenomenon impacting high-growth metros like Seattle, as well as slower-moving markets, like Indianapolis. It might be easy to assume another bubble is emerging, with home values growing 10 or 12 percent per year, but don't worry. The market is reacting to basic economic laws, and is behaving exactly the way we would expect it to given good overall growth, limited supply of homes for sale and decent housing affordability thanks to low mortgage interest rates."