In recent months, a large number of homeowners across the country have been able to enjoy positive equity for the first time in years thanks to rising home values, and this was the case in May as well.
The average home value nationwide climbed 0.5 percent from April’s total to $159,000 in May, which was also up 5.4 percent from the prices seen a year prior, according to the latest Zillow Home Value Index. The annual increase was the second-largest seen on that basis in 12 months, lagging behind only January’s 5.6 percent jump.
As a result of this latest increase, the streak of home values failing to decline from one month to the next stretched to 19 months, the report said. Further, current home prices are now at more or less the level observed in July 2004. This was reflected in slightly more than half of the 360 metropolitan areas Zillow surveys, and especially among the 30 largest markets (29 of which also saw annual price increases). Sacramento, Las Vegas and Los Angeles had the largest month-over-month price increases in the country, at 1.7, 1.3 and 1 percent, respectively.
“Inventory constraints are beginning to ease in many areas as more listings and new homes come on line, which will ultimately help end this period of rapid annual home value appreciation above 5 percent,” said Zillow chief economist Stan Humphries. “Additionally, as interest rates begin to rise from their historic lows, some demand may also ebb from the market as home purchases become more expensive to finance. While we believe the housing recovery will remain strong, home value appreciation will slow down, and buyers in it for the short term could get burned if they assume home values will continue rising as they have unabated.”
That price slowdown may not be too appreciable, however, the report said. Over the next 12 months, it’s believed that home values will still rise 4.1 percent, to a total of slightly less than $165,500.
Many consumers who have been considering buying a home may want to do so in the near future, as rising values and interest rates alike will typically serve to drastically reduce affordability, which has previously been hovering at or near all-time highs. This may also be the case for current owners looking to refinance, who could take advantage of existing low rates while there’s still time to do so.