Downturn on the American Dream

According to Zillow's April 2019 Real Estate Market Report, U.S. home values fell from March to April, the first month-over-month decline since February 2012.

The typical U.S. home is worth $226,800, down 0.1% from last month. The decline - led primarily by large West Coast markets - comes after 85 straight months of gains that brought home values to record highs. U.S. home values have experienced declines only twice over the past few decades: during the recession of the early 1990s and the Great Recession and housing crisis in the late 2000s.

On an annual basis, home values grew 6.1%. But the pace of year-over-year appreciation has slowed in each of the past four months, falling from 8.1% annual growth as recently as December.

Home values fell in 32 of the 35 largest housing markets over April and remained flat in two others. Riverside, Calif., was the only large market that saw its home values appreciate during the month. This downturn has been a longer-term trend in other large California markets - home values have fallen in at least each of the previous three months in San Jose, San Francisco, San Diego and Los Angeles.

"The widespread decline in home value growth in April - the first in many years - will turn heads. But it's too early to say if we've hit another national home value peak and are at the beginning of a sustained downturn, or if this is just a bump in the road," said Zillow Director of Economic Research Skylar Olsen. "Month-over-month numbers are volatile, and this small decline could reverse itself before the year is out and before national home values go negative on a year-over-year basis. That said, the likelihood that home values have peaked in several local markets is real. The price correction in these areas should continue after years of significant home value growth that substantially outpaced income growth."

Home values have likely peaked in Los Angeles, Philadelphia, Houston, Miami, Boston, San Francisco, Seattle, San Diego, St. Louis, Tampa, Baltimore, Pittsburgh, Portland and San Jose.

Rent prices continued to accelerate, growing for the sixth consecutive month. The median U.S. rent rose 2.6% on an annual basis to $1,477. Rents grew the fastest in Las Vegas (up 7.8%), Phoenix (up 6.7%) and Orlando (up 6.4%).

Inventory fell 1.7% year-over-year in the U.S. Washington, D.C., has seen the most significant drop, with 31.7% fewer homes for sale than this time a year ago.

Despite the drop nationally, for-sale inventory has grown significantly in expensive West Coast markets San Jose, Seattle and San Francisco - this is due to cooling demand rather than a flood of new listings.

Mortgage rates listed on Zillow rose slightly in April. Rates grew as high as 4.17% before ending the month at 4.06%, up four basis points from April 1. Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.