The house sales market remains hot as the typical home value rose to $259,906 in September.
The month-over-month growth rate moved up 0.8%, the most significant jump since November 2005, according to the Zillow Real Estate Market Report. The quarterly growth of 2.2% was the largest increase since 2013 and the annual growth of 5.8% was the largest in nearly two years.
For the third consecutive month, home values have risen in every major US metro compared to the month prior. The median national list price rose 11.6% year-over-year as of the week ending Oct. 10.
With recent data showing double-digit annual growth in both list and sale prices, Zillow predicts seasonally adjusted home values to increase 2.9% more through the end of 2020 and rise 7% in the next year. Prior forecasts called for a 4.8% rise through next year.
“Home values are accelerating more quickly than any time since 2014, marking a sharp turnaround from a market briefly put on hold during the outbreak of the pandemic this spring,” said Zillow senior economist Jeff Tucker in a prepared statement. “The historic shortage of homes available for sale has boosted home price appreciation, now that buyers are waging bidding wars for the few options left. Builders are racing to fill the gap, and we may see more listings next year if nervous sellers become reassured, but this shortage of homes is so deep that any reversal would take at least several months.”
As home prices increase, rent growth is slowing, according to Zillow. While typical US rents inched up 0.9% annually in September to $1,756, they are dramatically below 4% posted in February. Rents nudged down 0.1% month over month in September after a 0.5% monthly decline in August.
The markets with the highest rents saw the sharpest since 2019, with New York dropping 6%, San Francisco falling 5.9% and San Jose declining 4.5%. Rents continued to rise across much of the Midwest and Sun Belt. Memphis (8.7%), Phoenix (7%), and Riverside (6.9%) saw the highest annual growth in rents.
The migration of millennials to single-family homes could be a significant reason that rents are dropping and home prices are surging.
A new survey from Morning Consult suggests that more than one-quarter of millennials who don’t own a home, 28%, said they are more interested in purchasing one because of the pandemic.
“Millennials have already delayed home ownership, so those in the upper age bracket of that generation might simply be ready to move out of rented spaces, especially with coronavirus restrictions,” according to Morning Consult’s Claire Williams.
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