Big Price Gains
Home Values See Largest Annual Gain Since 2006
U.S. home values in 2012 rose 5.9 percent over 2011, according to data in Zillow’s latest Home Value Index (HVI).
The 5.9 percent appreciation rate is the largest annual gain since August 2006, near the peak of the housing bubble.
While the market still has some ground to cover before it’s completely healthy again, Zillow said in a release that 2012’s appreciation rate “far exceeded yearly rates of appreciation typically associated with healthy markets,” which “can expect annual home value appreciation of roughly 3 percent on average.”
Looking ahead, the Zillow Home Value Forecast projects an appreciation rate of 3.3 percent in 2013, more in line with historic norms.
In addition, the fourth quarter of 2012 saw home values rise to an average $157,400, up 2.5 percent over Q3, according to the fourth quarter Zillow Real Estate Market Reports.
Of the 30 largest metros covered in the HVI, only Cincinnati and Chicago failed to report annual and quarterly increases in the fourth quarter, Zillow said. Of the 366 total metros analyzed, 254 (69 percent) registered annual home value gains in 2012, while 278 (76 percent) experienced quarter-over-quarter appreciation.
“We expected 2012 to be a good year for housing, and it delivered in spades,” said Zillow chief economist Dr. Stan Humphries. “Strong demand paired with limited inventory in many markets helped fuel a robust and often rapid recovery in overall home values, good news for homeowners after years of poor performance.”
While home value appreciation is expected to slow down in 2013, Humphries said the anticipated 3.3 percent annual appreciation rate is “more sustainable.” That said, consumers should be careful to temper their expectations accordingly.
“It’s important to be cautious moving forward, even as we celebrate the undeniably positive end to 2012, and be careful that consumers don’t grow to expect such high appreciation as the norm,” Humphries said. “Buying a home should be a long-term decision, and these swings between a deep housing recession and higher-than-normal appreciation rates can give consumers whiplash and cause some to lose sight of that.”
As home values rose throughout 2012’s fourth quarter, foreclosure activity declined, with 5.22 out of every 10,000 homes nationwide facing foreclosure in December (down 2.2 homes per 10,000 year-over-year and 1.2 homes quarter-over-quarter). The share of foreclosure re-sales dropped to 12 percent, down 4 percent from the end of 2011 and 0.3 percent from the third quarter.
Meanwhile, national rents fell 0.6 percent from the third quarter to the fourth; however, rents were up 4.2 percent year-over-year in 2012. The Zillow Rent Index stood at $1,274 at the end of December.