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The housing inventory shortage this summer drove home values up 0.7% in August from July 2020, the biggest month-over-month increased in nearly seven years, according to Zillow's Real Estate Market Report for August.
Additionally, the report revealed that home value growth increased last month in 48 out of the 50 largest markets in the U.S. According to Zillow, home values are up 5.1% in August, year-over-year.
One thing the rise in home values shouldn't do is affect the ability of first-time home buyers to make down payments. While the value increases may be significant, in actual dollars the impact isn't that painful.
"American home shoppers faced a historic shortage of listings to choose from this summer, and that scarcity is now reflected in rapidly appreciating home values after a sluggish start to the home shopping season this spring," said Zillow economist Jeff Tucker. "Builders are racing to catch up with demand, and rising prices should encourage more potential sellers to come off the sidelines and list. Still, the shortage of inventory should keep housing markets unusually tilted in sellers' favor this autumn."
Demand is continuing to outpace supply as homes continue to sell at a record pace. Zillow predicts that the increase in home prices will continue until at least through fall, with purchase demand holding steady.
The rise in home values won’t have a significant impact on down payments, says Odeta Kushi, deputy chief economist at First American. “Comparing how house price appreciation impacts the amount needed for a down payment can help dispel the notion that price appreciation is pushing down payments out of reach for home buyers,” she said.
In a blog post she wrote on the First American website, Kushi said, “Given the median home price for the top 10 most populous U.S. markets and assuming a 3% down payment, the amount by which the down payment would increase if annual house price appreciation in each market remained at July’s pace, varying from 6 to 11%, ranges from $400 to as much as $1,400.”
“Potential first-time home buyers tend to be younger and do not have the equity from the sale of an existing home to bring to the closing table. The most significant impediment for first-time home buyers has always been and remains the challenge of saving the money for a down payment. However, first-time home buyers have a variety of low down payment options, so for those who were already planning to buy and had a down payment lined up, the additional down payment burden from rising house prices may be a lot less than many expect,” she concluded.
