Home values may fall in the second half of the year as the housing market and economy as a whole cope with the fallout from the COVID-19 pandemic, accouding to a report released by Zillow on Thursday.
According to the Zillow Home Value Index, the typical home value in the United States is $251,598, up 4.3 percent from last year – a small acceleration from April’s 4.2 percent year over year. But by more recent measures the growth rate has begun to slow.
In April, home values grew 0.41 percent month over month and slowed to 0.35 percent in May, the biggest one-month slowdown in more than a year – and “a possible indicator that the market is headed for home value declines in the coming months,” Zillow said.
“Home buyers 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,” said Skylar Olsen, senior principal economist at Zillow.
Zillow’s report found that home value growth slowed down in 27 of the 35 largest metropolitan areas in May. Home values fell from April to May in five areas – San Francisco, San Jose, Pittsburgh, Los Angeles and Sacramento.
“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,” Olsen said. “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.”