MReport October 2021

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M REPORT | 55 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Home Value Appreciation Slows Analysts assess the market and elaborate on what consecutive months of price deceleration means for the remainder of 2021. F or the first time since Janu- ary, home value appreciation slowed month over month in August. That does not mean it is typical, data analysts say. More accurately, the market has eased from "white hot to merely red hot," as Zillow's Nicole Bachaud puts it. Competition eased slightly as inventory rose for a fourth consecutive month, she added, expounding on a Zillow housing report focused on last month. According to the report, the typical U.S. home was worth $303,288 in August, compared to $298,061 in July. "Monthly home value appre- ciation has been faster than the month before in every month since January, but finally eased in August, slowing from 1.97% month-over- month growth in July to 1.75% in August," Bachaud summarized. "But while the slowdown is a notable change, August's 1.75% monthly growth still represents the third- fastest monthly pace in more than 20 years of Zillow data." Monthly home value growth was still positive nationwide and in all 50 of the country's larg- est markets, but the monthly slowdown was widespread, with 43 of the 50 largest major metros seeing appreciation cool between July and August, compared to only 20 from June to July. The largest drop-offs were in Buffalo, San Diego, and San Francisco, the analysts reported. Nationwide, the share of list- ings with a price cut rose for the fourth consecutive month, to roughly one-in-eight homes, or 12.25%, from roughly one-in-10 in July, or 10.3%. In August 2019, prior to the pandemic, the total share was 17.4%, Zillow reported. As expected, rents also shot up in metros across the country— year over year, they were up in every major measured metro and on a monthly basis they went up everywhere except Kansas City, Richmond, and Cincinnati (flat). Experts do not expect the monthly decreasing pace of price acceleration to translate to an annual slowing until, potentially, 2022. Year-over-year growth in the Zillow Home Value Index is expected to end 2021 up 19.9% from the end of 2020 and continue accelerating to 20.1% in January 2022 before beginning to slow down. The researchers also have adjusted expectations upwards for com- pleted existing home sales, which they predict will exceed 5.9 million in 2021. Zillow economists expect the typical U.S home value to increase 4.7% over the next three months (August-November), and to end August 2022 up 11.7% from August 2021. They also have revised downward the three-month and 12-month home value forecasts. "We expected 5.2% growth from July-October and 12.1% growth from July-July," Bachaud said. "The small downward revisions were influenced, in part, by recently slowing monthly home value appreciation and continued increases in inventory that should contribute to a modest rebalancing in the market between buyers and sellers. The home value forecast was also influenced by the pos- sibility of rising mortgage interest rates over the longer-term, which may serve to slightly dampen growth in housing prices." On the other hand, she says, expectation for home sales have improved since last month. "We expect a total of 5.93 mil- lion existing home sales in 2021, up 5.1% from 2020 (on its own the strongest year for existing home sales since 2006) and higher than the 5.89 million sales in 2021 that we expected last month. Strong sales growth in July helped nudge our outlook through the end of the year higher, though the possibility of diminished housing affordability (through both higher prices and potentially higher mortgage rates) and a continued slowdown in household formation continue to weigh on the longer- term outlook."

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