US house prices are set for a slowdown this year, as the country's real estate market returns to normal.
The recovery of property is becoming increasingly varied from region to region, according to Zillow, with bidding wars helping to drive up home values in the nation's hottest housing markets, even as home values level off far below the record levels set during the bubble in quieter markets.
Indeed, Denver home values rose 14.7 per cent year-over-year in May (to a median just under $300,000) and Las Vegas home values slowed to a year-over-year growth rate of just 6.3 per cent. Las Vegas prices remain 38.6 per cent below the peak set in 2006, while Florida markets in Tampa, Miami-Fort Lauderdale and Orlando remain more than 30 per cent under their peak.
Home values grew at an annual rate of 3 percent in May, to a Zillow Home Value Index of $179,200. National home values were still nearly 9 per cent below the housing-bubble peak of $196,400, a record set in April 2007, before the housing bust drove the country into a prolonged recession.
"The country by-and-large rode the same big roller coaster through the housing bubble, bust, and recovery," says Zillow.
"What we're seeing is the passing of the baton as mortgage rates begin to rise and incomes and household formation rates increase - from a stimulus-driven housing market to one driven by fundamentals," comments Chief Economist Dr. Stan Humphries. "This transition from housing recovery to a more normal market is a good thing in the long-term, but we can expect some bumps along the way. In the end, increasing household formation and stronger income growth should be able to overcome the headwind of rising mortgage rates and return markets to health."
Rents continued to outpace home values in 20 of the 35 largest metro areas. In Kansas City, for example, median home values were essentially flat, rising two-tenths of a percent in the past year. But rents were up more than 10 per cent.
Over the next year, Zillow forecasts home value growth to slow even further, to 2.2 per cent annually - down from last year's 4.9 per cent.