The housing market has bounced back in a big way, but now it’s slowing down — and that’s a good thing, according to Zillow CEO Spencer Rascoff.
But Zillow’s Home Value Index — which Rascoff says is more timely and more indicative of the broader market than the Case-Shiller index — shows U.S. home values fell for the second straight month in October, to an annual appreciation rate of 5.2 percent. Zillow expects that appreciation rate to drop to 2.7 percent in the next year.
“Historically, homes in the U.S. appreciate at roughly 3 percent to 5 percent per year, so sustained appreciation much above that is a red flag,” Rascoff said.
“Additionally, home values were rising much faster than incomes in many areas, and while very low mortgage rates helped plaster over this growing affordability problem, it is becoming more exposed as rates rise. If homes get too expensive for local homeowners to buy, then home prices by necessity have to slow their growth or even fall.
“In other words, slow and steady wins the race, and housing is better when it’s boring.”