Monthly increases in both home value and rent have cooled down in August, according to the latest monthly Zillow report, paving the way for a more temperate housing market this coming fall. Another month of rising inventory and price cuts for home listings allows buyers to breathe easier this season, with more options and less stress when shopping for a home.
“The strong recovery of inventory and initial lift off the gas pedal for home value appreciation is indicative of balance returning to the market,” said Nicole Bachaud, economic data analyst at Zillow. “But, the major demand drivers that have pushed the market to extremes this year are still present — we're moving from a white-hot midsummer to somewhere closer to red hot as we head into the fall.”
Home value appreciation has been accelerating since January, but has finally begun to ease off the throttle, moderating from 1.97% month-over-month growth in July to 1.75% month-over-month growth in August. Although prices are improving for new homebuyers, August’s figures still represent the third largest monthly growth in Zillow’s records.
Home value appreciation slowed its pace in 43 out of the 50 largest major U.S. metros compared to just 20 metros in July. The largest drops in home value growth occurred in Buffalo, San Diego, San Francisco and Austin.
Overall, home values increased 17.7% ($45,557) year-over-year, bringing the typical U.S. home value to $303,288. The top metros for annual home value growth were Austin (44.8%), Phoenix (31.8%), Salt Lake City (27.9%) and San Diego (26.9%).
Another main contributor to the cooling of the housing market is the rebound in housing inventory. Housing inventory continues to rise for the fourth consecutive month, growing 4.1% over July and cutting the annual deficit to 22.7%. That is up from the -33% year-over-year low in April. For-sale listings experienced the highest monthly growth in the Midwest. Additionally, Washington D.C. and Austin have more available inventory than they did last year.
Price cuts rose for the fourth consecutive month, which has helped restore the market to its natural balance. A total of 12.3% of U.S. listings saw a price reduction before an offer was accepted in August, growing 1.9% from the previous month. In August 2019, however, the share of price cuts was 17.4%.
"Another month of rising for-sale inventory gives shoppers more options to choose from and less competition, which should help reduce bidding wars and further moderate rampant price hikes," Bachaud said. "A slightly less frenzied market means buyers have a much better chance to land the home they're bidding on, and may even see a price drop on their saved listings, but keep in mind the market is still much hotter than normal for this time of year."
In the rental market, monthly rent growth has been accelerating since January as well, but slowed its pace in August to 1.7% monthly growth from July’s all-time high of 2%. However, August’s 11.5% annual appreciation is the highest in Zillow’s records going back to 2015. According to Zillow’s Observed Rent Index (ZORI), typical U.S. rents are $1,874, or $200 higher than a year ago.
For further analysis, including monthly data at the national, state, metro, city, ZIP code and neighborhood levels, read Zillow’s monthly report.
