According to the Zillow Home Value Index, value for an average house in the U.S. came in at $251,598. This amount is up 4.3% year-over-year, presenting an ever-so-slight uptick from April’s 4.2% annual gain.
Although the housing market has rallied valiantly throughout the COVID-19 pandemic, it did take a hit, with houses moving at a significantly slower pace. But, despite this slowed momentum, home values have surprisingly been able to stay the course and remain on solid footing. In fact, pricing for homes has kept the same upward trajectory as before COVID ever hit the scene. However, the May Zillow Real Estate Market Report seems to point to the possibility (and probability) that these currently ascending home values will not remain on the rise.
The index went on to reveal that while home values rose 0.41% in April month-over-month, they dipped to 0.35% in May. This fall represents the largest recession for a single-month time span since March 2019. Experts point to this as the crux of their prediction for a coming decline in home value prices from now onward. Specifically, Zillow’s experts project home prices to fall 1.8% through the month of October, only recovering in the spring of 2021.
Regarding the exact areas that were most affected by the home value growth recession, Zillow data shows that no one region was immune. In fact, 27 of the 35 largest American metro areas experienced significant slowdowns. Among further interesting details emerging from the report is that the worst of the falls from April to May were reported in San Francisco; San Jose; Pittsburgh; Los Angeles; and Sacramento.
Skylar Olsen, Senior Principal Economist at Zillow offered perspective on the current state of affairs, as well as insights into what will happen next: "Homebuyers returned to the market earlier than might have been expected given the state of the economy, finding a market starved for inventory because of seller uncertainty. This improved demand has supported home prices and appears to have given sellers a confidence boost as new listings have slowly picked up.”
Olsen added: "The next question housing will face is whether this growth can continue after demand built up during housing's brief pause in the pandemic's early days runs its course. It's likely housing will feel the broader economy's downturn eventually, though to a mild degree, and home values will fall in the coming months."