By Mark Calvey: Reporter for San Francisco Business Times
Zillow’s latest figures show that the nation’s housing market is cooling off, even the white-hot Bay Area.
The national housing market is slowing down, with home values showing the first monthly drop since the market began recovering four years ago, according to the real estate data company’s report for July.
San Francisco, San Jose, Denver and Dallas are still tallying double-digit year-over-year home value increases, but even those hot markets are seeing a pullback in their pace of appreciation from June, Zillow said.
In San Francisco, July’s Zillow Home Value Index stood at $756,100, up 0.6 percent from June and 11 percent higher from July 2014. In San Jose, July’s Zillow Home Value Index was $891,500, up 0.7 percent from June and 11.5 percent from July 2014.
“This slip in home values is a sign of the times. Many people didn’t think it was happening, but it is: we’re going negative,” Zillow Chief Economist Svenja Gudell said in speaking of the national housing market. “We’ve been expecting to see a monthly decline as markets return to normal.
“The market is leveling off, and it’s good news, particularly for buyers, because it will ease some of the competitive pressure,” Gudell said. (Note to loyal followers of Zillow’s number-crunching: Gudell’s predecessor Stan Humphries was promoted to chief analytics officer for Zillow Group.)
Zillow (NASDAQ: Z) expects that the pullback in June-to-July valuations in several cities, including Cincinnati and Washington, D.C., will spur home owners, who have been sitting on the fence pondering whether to sell, to finally put their homes on the market. That would help ease a shortage of available homes for sale that buyers have confronted over the last several months.
But the slower rise in appreciation, if not outright depreciation, will likely come as a shock to Bay Area home owners accustomed to robust growth in home values. Still, the key to home values will continue to be the pace of job growth.
Zillow says falling valuations and more homes on the market may spur renters to buy, especially given the dramatic increases in rents. San Francisco area rents jumped 14.1 percent to $3,285, according to the latest figures from Zillow. The company found that Bay Area rents can be quite painful, literally, as tenants skip doctor and dentist visits so they can pay the landlord.
As for the national picture on home values, Zillow saw declining home values in 204 of the 517 metro areas covered by the company. Economists have expected to see growth flattening as the recovery continues. After all, trees don’t grow to the sky.
(Note: Soon after this story was published, two stars from Bravo’s “Million Dollar Listing San Francisco” shared their insights on the Bay Area housing market.Justin Fichelson, a sales associate with Climb Real Estate in San Francisco, looked at the impact that stock market turbulence will have on the region’s residential real estate market, given the significance of tech buyers and their stock options on home prices. Andrew Greenwell, CEO of Pleasanton-based Venture Sotheby’s International Realty, weighed in with a prediction that the Bay Area’s ferocious bidding wars will become a distant memory.)