As more inventory of for-sale homes helped slow previously high rates of appreciation, from December to January, national home values saw the smallest monthly increase since May 2012, according to the January Zillow Real Estate Market Reports.
National home values rose just 0.2% to a Zillow Home Value Index of $169,600.
Nationwide, while inventory remains tight, the number of homes listed for sale on Zillow was up 11.1% annually in January on a seasonally adjusted basis – the fifth straight month of rising year-over-year inventory.
Inventory rose year-over-year in 22 of the nation's 35 largest metro areas covered by Zillow, with the largest inventory gains coming in some of the areas that were hit hardest by the housing recession, including Las Vegas (up 42.8%); Phoenix (up 30.5%); and Sacramento, Calif. (up 26%).
Those metros also experienced significant cooling in the pace of home value appreciation in January, Zillow notes, as buyers had more homes to choose from and were less apt to engage in the kinds of bidding wars that helped drive prices up so quickly last year.
‘Last year, tight inventory contributed to very rapid home value appreciation. Now, more inventory is helping to moderate home value increases in many areas," comments Stan Humphries, chief economist for Zillow.
"This increased supply is coming from many sources, as more sellers are free to list their homes after being released from negative equity, builders continue to ramp up construction, and many homeowners decide to list their homes and capitalize on recent gains," he adds.
Year-over-year, U.S. home values rose 6.3% in January – down from peak gains of 7.1% in August 2013. For the 12-month period from January 2014 to January 2015, national home values are expected to rise another 3.4% to approximately $175,301, according to the Zillow Home Value Forecast. Large metro areas expected to show the most appreciation over the next year include Riverside, Calif. (13.3%); Orlando, Fla. (10.3%); and Sacramento, Calif. (9%).
National rents rose in January from December, up 0.4% to a Zillow Rent Index of $1,307. Year-over-year, national rents were up 2.8% in January.
‘As the market shakes off a long winter and gears up for the spring season, we should see buyers gaining a bit more leverage this year than they've had in the past, with more choice and less competition. This slightly more balanced market is another step on the road back to normal, and will help offset the impact of rising mortgage rates and more expensive homes for buyers," Humphries concludes.