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Home Values May Be Moving in the Wrong Direction

Home value growth slowed again in May, as Zillow’s Housing Market Report [1] shows the typical home is worth $226,800, which is down 0.1% from April. 

The value, however, is up 5.4%, year-over-year. Zillow states that May’s growth rate is still above the average pace set by Zillow of 3.8%, but represents a notable slowdown from both May 2018’s 7.5% and the recent high of 8.1% in December 2018. 

According to Zillow, 33 of the top 35 U.S. markets grew slower in May than they did last year. Indianapolis, Indiana, and Cincinnati, Ohio, were the only two markets were growth exceeded 2018’s numbers. San Jose, California, is the only market that saw home values fall year-over-year, dropping 5.7%. 

Home values declined for the second-consecutive month after 85 months of growth. Zillow said these declines are notable for their “rarity over the past six-plus years,” after the housing market rebounded following the Great Recession. 

Zillow said the decline’s are “fairly minor,” and home-value growth could also be described as “flattening.” Homes in March, before the past two declines, were valued at $227,200, which is just $400 more than they are currently worth. 

“As the busy home shopping season enters the summer months and buyers continue to hit the market, even modest monthly growth could easily erase that decline,” the report stated. 

Inventory of homes for sale in May also decline, dropping to 1.58 million, which is a slight 0.5% year-over-year drop. Zillow states, though, that inventory is up in 23 of the 35 largest housing markets. 

For-sale inventory grew in Las Vegas, Nevada (41.8%), San Jose, California (40.6%), Denver, Colorado (25%), Seattle, Washington (23.9%), and San Francisco, California (21.4%). 

While home values are falling, rent is accelerating, with the U.S. Zillow Rent Index rising 2.7% in Maty to $1,479 per month. Rent growth has accelerated in each of the first five months of 2019, and rent is higher when compared to May 2018 in the 35 largest housing markets.