Takeaways:

  • Home values saw their first negative monthly change since the market began its turnaround about four years ago.
  • The slowdown is not unexpected, as economists have said they expect to see growth flattening out as the recovery continues and the market returns to normal.
  • Nearly half of the 517 metropolitan areas covered by Zillow saw a slowdown last month.

The impact that rising home values have had on the housing market recovery may be starting to slow down, according to a recent Zillow market research report.

Zillow’s Real Estate Market Report for July shows that home values saw their first negative monthly change since the market began its turnaround about four years ago. Homes lost 3.4 percent of their value from June to July and 3 percent on an annual basis, Zillow said.

The slowdown is not unexpected, as economists have said they expect to see growth flattening out as the recovery continues and the market returns to normal.

“This slight dip in home values is a sign of the times,” said Zillow Chief Economist Dr. Svenja Gudell. “Many people didn’t think it was happening, but it is: We’re going negative. We’ve been expecting to see a monthly decline as markets return to normal. However, this is not like the bubble bust. We’re not going to see 10 percent declines. The market is leveling off, and it’s good news, particularly for buyers, because it will ease some of the competitive pressure.”

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In fact, slowing home values could provide more opportunities for buyers who may have been waiting for the market to cool off and inventory to open up, Zillow said. At the same time, with rent prices continuing to escalate, conditions may be even better for buyers to enter the market, the company said.

Nearly half of the 517 metropolitan areas covered by Zillow saw a slowdown last month. Values in Washington, D.C., and Cincinnati experienced the biggest month-over-month decline, with each city seeing a 0.5 percent decrease.

Even hot markets like Denver, Dallas, San Jose and San Francisco, which had double-digit annual home value growth in July, saw their monthly appreciation rates ease from June, but most areas experienced changes of less than 1 percent, Zillow said.

Email Amy Swinderman.

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