Rents declined nationwide on an annual basis for the first time in more than six years, as the median U.S. rent was $1,440, according to the September Zillow Real Estate Market Report
. This total is down 0.2 percent (which translates to $36 in annual rent) from last September, the first annual nationwide decrease since July 2012. Rent appreciation slowed for seven consecutive months before turning negative in September.
Rents decreased on an annual basis in more than half of the nation's 35 largest markets. The biggest declines in rent were in Portland, Ore., where rents fell 2.7 percent, and Seattle, where they fell 2.2 percent. However, some markets are still seeing rising rents: Riverside, Calif., rents increased the most, up three percent from last September.
Home value appreciation also slowed in September, growing 7.6 percent from the year prior to a median of $220,100. In August, home values rose 7.8 percent annually.
Even as home value growth nationwide is slowing, six of the biggest U.S. housing markets saw double-digit appreciation, led by San Jose, where the median home value increased by 20.9 percent. Even that is slower appreciation than San Jose has seen in recent months–in June, home values there were up 25.4 percent annually. In contrast, Washington, D.C., homes saw the smallest appreciation, gaining 3.7 percent annually.
The slowdown in home value appreciation could benefit home shoppers, but it comes as mortgage rates have seen a sharp increase since the beginning of the year. The higher interest rates have eroded most of the benefits from slower home value growth as mortgage payments for the median-valued U.S. home are growing more than twice as fast as home values.
"Today's data are yet another signal that the housing market is easing toward a more normal, sustainable pace after the frenzy of the past three years," said Zillow Senior Economist Aaron Terrazas. "With slowing rents and home value growth, searching for a new home should be somewhat less competitive than it was a year ago, giving renters and buyers a bit of breathing room. Rents remain high by historic standards, but September's modest annual decline in rents should ease some of the pressure pushing higher-income renters to buy. And though home value appreciation is slowing, homes are more expensive than ever, making it difficult for first-time buyers to save for a down payment to break into the market. Housing plays a central role in most people's finances, but for people already in their homes with fixed mortgages, there's minimal spillover. For renters, slower rent growth is welcome news and will put more spending money in their already stretched pockets. The slowdown in new construction is more worrisome for the overall economy: Home building has been a net contributor to economic growth and employment, but rising costs mean that it could shift toward a drag in the future."