HOUSING MARKET OVERVIEW 2018 Q3 · 2019-09-12 · ZILLOW HOUSING MARKET OVERVIEW | PAGE 3 2001 2003...

HOUSING MARKET OVERVIEW 2018 Q3Zillow Economic Research

ZILLOW HOUSING MARKET OVERVIEW | PAGE 2

HOME VALUES AND RENTS

• U.S. home values are growing at a steady pace, and have surpassed pre-recession highs nationally and in a number of large markets. Driven largely by limited inventory and high demand, home values are growing fastest at the bottom end of the market.

• Regionally, markets in the Pacific Northwest, Texas, Florida and parts of the Southwest continue to outperform slower-moving markets in the Midwest and Mid-Atlantic.

• Growth in U.S. rents has slowed considerably over the past couple of years and has largely stabilized. Pockets of strong rent appreciation remain in the Pacific Northwest and California.


2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

$100K

$110K

$120K

$130K

$140K

$150K

$160K

$170K

$180K

$190K

$200K

$210K

$220K

Zill

ow

Ho

me

Val

ue In

dex

$220,100

May 2007$200,500

February 2012$148,600

Trough-to-Current+48.1%

U.S. home values have surpassed pre-recession highs.

Source: Zillow Home Value Index (September 2018).

+48.1% +7.6%Trough-to-Current Year-over-Year

Zillow Home Value Index


1999 2004 2009 2014 2019

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Yea

r-o

ver-

Yea

r C

hang

e in

ZH

VI

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Mo

nth-

ove

r-M

ont

h C

hang

e in

ZH

VI

7.6%

0.4%

Annual Home Value Growth Monthly Home Value Growth

The pace of annual U.S. home value growth has accelerated over the past few years.


Zillow Home Value Index, Annual and Monthly Growth


Washington, DC3.7%

Tampa, FL9.9%

Seattle, WA7.4%

San Jose, CA20.9%

San Francisco, CA9.8%

Sacramento, CA4.8%

Pittsburgh, PA7.1%

Phoenix, AZ7.3%

Philadelphia, PA4.7%

Orlando, FL9.7%

New York, NY5.2%

Los Angeles, CA5.4%

Las Vegas, NV15.4%

Kansas City, MO9.1%

Houston, TX6.3%

Detroit, MI9.2%

Denver, CO6.2%

Columbus, OH7.9%

Boston, MA6.2%

Austin, TX6.6%

St. Louis, MO5.4%

San Diego, CA5.9%

Portland, OR4.9% Minneapolis, MN

6.8%

Miami, FL8.0%

Dallas, TX10.7%

Cincinnati, OH7.2%

Chicago, IL5.3%

Charlotte, NC10.5%

Atlanta, GA12.3%

3.7% 20.9%Annual Home Value Growth

Markets in the Pacific Northwest, Texas and Florida continue to outperform slower-moving markets in the Midwest and Mid-Atlantic.


Annual Home Value Growth


0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%Expected Home Value Appreciation Through September 2019

Boston, MA

Dallas, TX

Detroit, MI

Atlanta, GA

Chicago, IL

San Francisco, CA

Tampa, FL

New York, NY

United States

Minneapolis, MN

Philadelphia, PA

Miami, FL

Seattle, WA

St. Louis, MO

Los Angeles, CA

San Diego, CA

Baltimore, MD

Riverside, CA

Washington, DC

Phoenix, AZ

Houston, TX 2.8%3.3%3.4%

3.7%3.8%

4.6%5.1%5.1%

5.3%5.5%

5.6%5.9%

6.4%6.9%7.0%7.1%

7.7%8.6%

8.8%9.1%

6.4%

Home value growth is expected to slow over the next 12 months.

Source: Zillow Home Value Forecast, Top 20 Metros (September 2018).

Zillow Home Value Forecast


1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018$0K

$50K

$100K

$150K

$200K

$250K

$300K

$350K

$400K

Zill

ow

Ho

me

Val

ue In

dex

$382,400

$220,100

$125,300

Bottom Third Median Home Values Top Third

Zillow Home Value Index, by Thirds


Homes valued in the bottom-third of the market are growing in value the fastest.


1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Ann

ual H

om

e V

alue

Gro

wth

10.0%

4.7%

7.6%

Bottom Third Median Home Values Top Third

Annual Home Value Appreciation, by Thirds


Home value appreciation among homes valued in the bottom third has slowed somewhat, but the annual pace of growth is still more than double that of top-third homes.


2011 2012 2013 2014 2015 2016 2017 2018 2019

$1,240

$1,260

$1,280

$1,300

$1,320

$1,340

$1,360

$1,380

$1,400

$1,420

$1,440

Zill

ow

Ren

t In

dex

$1,440

Annual growth in rents has slowed since the beginning of 2018.

Source: Zillow Rent Index (September 2018).

Zillow Rent Index


2012 2013 2014 2015 2016 2017 2018 2019

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Ann

ual R

ent

Gro

wth

-0.2%

For the first time in six years, median rent is less than it was 12 months earlier.


Zillow Rent Index


Washington, DC-0.9%

Tampa, FL1.4%

Seattle, WA-2.2%

San Jose, CA-0.9%

San Francisco, CA-0.6%

Sacramento, CA1.8%

Pittsburgh, PA-1.0%

Phoenix, AZ0.4%

Philadelphia, PA-1.7%

Orlando, FL1.0%

New York, NY-1.9%

Los Angeles, CA0.8%

Las Vegas, NV1.4%

Kansas City, MO-1.4%

Houston, TX0.1%

Detroit, MI0.3%

Denver, CO0.0%

Columbus, OH0.4%

Boston, MA-1.6%

Austin, TX-1.6%

St. Louis, MO-1.2%

San Diego, CA0.0%

Minneapolis, MN0.5%

Miami, FL0.1%

Dallas, TX-0.6%

Cincinnati, OH-0.4%

Chicago, IL-1.9%

Charlotte, NC0.0%

Atlanta, GA0.7%

-2.2% 1.8%

Annual Rent Growth

The annual pace of rent growth is largely sustainable in most large markets.


Annual Rent Appreciation


2012 2014 2016 2018

$1,250

$1,300

$1,350

$1,400

$1,450

$1,500

$1,550

Zill

ow

Ren

t In

dex

$1,414

$1,553

2013 2015 2017 2019-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Yo

Y

-1.0%-1.1%

Multifamily Units Single-Family Homes

Rents for single-family homes and units in larger multifamily buildings share similar trends.


Multifamily and Single-Family Home Rents


-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%Expected Rent Appreciation Through September 2019

Riverside, CA

New York, NY

Minneapolis, MN

Boston, MA

Atlanta, GA

United States

Seattle, WA

Los Angeles, CA

Tampa, FL

Baltimore, MD

San Diego, CA

Dallas, TX

Miami, FL

Phoenix, AZ

Detroit, MI

Philadelphia, PA

Houston, TX

Washington, DC

St. Louis, MO

San Francisco, CA

Chicago, IL

-0.4%

-0.6%

-0.7%

-0.1%

-0.1%

-0.1%

0.6%

0.8%

0.8%

0.8%

0.5%

2.0%

2.5%

1.0%

1.4%

1.4%

1.3%

2.1%

1.1%

1.1%

1.1%

Rental appreciation varies regionally.

Source: Zillow Rent Forecast (September 2018).

Zillow Rent Forecast


HOUSING AFFORDABILITY• Overall, mortgage affordability – the share of income necessary to afford

a typical mortgage payment – looks reasonable in most markets. But affordability is declining, especially at the bottom end of the market, as home values nd interest rates rise and incomes fail to keep pace.

• As mortgage interest rates rise, some would-be home sellers with lower mortgage interest rates may decide not to sell and instead stay in their current home, choosing not to give up a lower monthly payment. This phenomenon of “mortgage rate lock-in” could end up negatively impacting inventory.

• Unlike mortgage affordability, rental affordability is worse today than it was historically, though the recent slowdown in rent growth has helped somewhat.

• Poor rent affordability is worrisome, as more money devoted to rent makes it more difficult to save for homeownership.


1988 1993 1998 2003 2008 2013 201812%

14%

16%

18%

20%

22%

24%

26%

28%

30%

24.4%

22.0%

19.7%

28.2%

17.7%

Average Share of Income Spent on Rent, 1985-2000

Average Share of Income Spent on Mortgage, 1985-2000

Historic MortgageAffordability,1985-2000

MortgageAffordability, 2018

Q3

Forecasted at 5%Rates



Historic RentAffordability,1985-2000

Rent Affordability,2018 Q3

28%26%24%22%20%18%21%

Share of Income Spent on Housing

Nationwide, the share of income spent on a mortgage is well below historic norms.

Source: Zillow Mortgage Affordability, Zillow Rent Affordability (2018 Q3).

Zillow Mortgage and Rent Affordability


Weak income growth and rapid appreciation, even with very low mortgage interest rates, means homes are becoming more unaffordable, more quickly for buyers of homes valued in the bottom third.

Source: Zillow Mortgage Affordability (2018 Q2).

Zillow Mortgage Affordability, by Thirds

2000 2002 2004 2006 2008 2010 2012 2014 2016 20180.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Sha

re o

f In

com

e S

pen

t o

n M

ort

gag

e

12.9%

15.4%

23.9%

Bottom Third Middle Third Top Third


2000 2002 2004 2006 2008 2010 2012 2014 2016 2018$0K

$10K

$20K

$30K

$40K

$50K

$60K

$70K

$80K

$90K

$100K

$110K

$120K

$130K

Ho

useh

old

Inco

me

$59,049

$20,960

$126,717

Income growth for the lowest earners has been especially weak.

Source: Zillow analysis of U.S. Census Bureau ACS data, IPUMS (2017 Q2).

Nominal Income Growth,

2000-2016

50.5%Top Third

35.2%Middle Third

30.5%Bottom Third

Household Income, by Thirds

ZILLOW HOUSING MARKET OVERVIEW | PAGE 18Source: Zillow Mortgage Affordability, Zillow Rent Affordability (2018 Q3).

Housing Affordability Table

Region Name Median Income

Mortgage Affordability,

2018 Q3

Historic Mortgage

Affordability, 1985-2000

Forecast Mortgage

Affordability (5% Interest

Rate)

Forecast Mortgage


Rate)

Forecast Mortgage


Rate)

Rent Affordability,

2018 Q3

Historic Rent Affordability

1985-2000

United States $62,807 17.3% 21.2% 19.2% 21.5% 23.9% 27.5% 25.8%

New York, NY $78,538 27.1% 29.1% 30.0% 33.5% 37.1% 36.2% 26.4%

Los Angeles,CA $72,999 43.8% 34.7% 48.0% 53.6% 59.5% 45.2% 36.3%

Chicago, IL $70,887 15.5% 23.1% 16.9% 18.9% 21.0% 27.7% 25.3%

Dallas, TX $69,924 16.5% 22.8% 18.7% 20.9% 23.2% 27.4% 21.7%

Philadelphia, PA $70,826 16.0% 20.4% 17.8% 19.9% 22.1% 26.5% 21.4%

Houston, TX $65,654 15.1% 20.9% 16.4% 18.4% 20.4% 28.3% 24.3%

Miami, FL $102,978 19.2% 22.6% 20.8% 23.2% 25.7% 24.9% 17.8%

Atlanta, GA $56,215 24.5% 20.3% 26.9% 30.1% 33.4% 39.6% 28.5%

Boston, MA $67,576 15.3% 18.2% 17.4% 19.4% 21.6% 24.8% 19.2%

San Francisco, CA $89,142 25.4% 26.4% 28.9% 32.3% 35.8% 31.9% 26.4%

Detroit, MI $106,777 44.3% 38.6% 49.1% 54.8% 60.8% 38.2% 30.7%

Riverside, CA $60,489 12.8% 16.0% 14.4% 16.1% 17.9% 23.7% 20.0%

Phoenix, AZ $64,800 27.7% 27.9% 30.0% 33.5% 37.2% 35.2% 32.7%

Seattle, WA $64,151 19.9% 21.0% 21.6% 24.1% 26.7% 25.4% 22.7%

Minneapolis, MN $85,406 28.1% 25.9% 30.6% 34.2% 38.0% 30.5% 23.8%

San Diego, CA $79,282 16.4% 17.8% 18.0% 20.1% 22.3% 24.8% 21.3%

St. Louis, MO $79,934 36.4% 33.6% 39.6% 44.2% 49.1% 38.1% 34.6%

Tampa, FL $63,729 12.7% 16.9% 13.9% 15.5% 17.2% 21.4% 21.2%

Baltimore, MD $53,740 19.2% 18.8% 21.4% 23.9% 26.5% 31.0% 27.7%

Denver, CO $79,199 16.6% 21.8% 17.9% 20.0% 22.2% 26.4% 26.9%


INVENTORY, CONSTRUCTION AND DEMOGRAPHICS

• Inventory of homes for sale is very low, and getting lower. Inventory constraints are particularly acute among entry-level and median homes – the exact homes sought by first-time homebuyers and young families.

• New construction has thus far failed to get back to pre-recession levels, especially for single-family homes.

• Homes that are on the market are selling faster – currently, homes spend ten days less on the market before selling than they did a year ago.

• Millennials do value homeownership, but many are finding it difficult to attain, and more young adults are living with their parents.


2013 2014 2015 2016 2017 2018 2019

1,200K

1,250K

1,300K

1,350K

1,400K

1,450K

1,500K

1,550K

1,600K

1,650K

Fo

r-S

ale

Inve

nto

ry

1,266,999

The number of U.S. homes for sale is low, and falling

Source: Zillow For-Sale Inventory (Seasonally Adjusted, Smoothed) (September 2018).

-26.4% -1.9%Peak-to-Current Year-over-Year

Zillow For-Sale Inventory


2013 2014 2015 2016 2017 2018150K

200K

250K

300K

350K

400K

450K

500K

550K

600K

650K

700K

Fo

r-S

ale

Inve

nto

ry

555,040

318,819

233,877

Bottom Tier Middle Tier Top Tier

Inventory shortages are particularly acute among bottom- and middle-third homes.

Source: Zillow For-Sale Inventory (Seasonally Adjusted, Smoothed) (September 2018).

-1.8% +2.3% -3.0%Bottom Third Middle Third Top Third

Year-over-Year % Change

Zillow For-Sale Inventory, by Thirds


2013 2014 2015 2016 2017 20180K

50K

100K

150K

200K

250K

300K

350K

400K

450K

500K

List

ing

s 338,372

373,016

New Listing CountNew Listing Count (Trailing Twelve Month Average)

The number of listings hitting the market has remained consistent

Source: Zillow Listing Data (September 2017).

New Homes Listed For Sale


2010 2011 2012 2013 2014 2015 2016 2017 2018 20190

20

40

60

80

100

120

140

Day

s o

n Z

illo

w

72

Homes listed for sale are selling more quickly than in the past few years.

Source: Zillow Days on Zillow, Including REOs (September 2018).

Days on Zillow

HOUSING MARKET OVERVIEW 2018 Q3 · 2019-09-12 · ZILLOW HOUSING MARKET OVERVIEW | PAGE 3 2001 2003...

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