U.S. home prices rose 1.3% in the third quarter, the biggest quarterly gain since 2006, but the recovery will be uneven, Zillow (Z) said.
The 3Q price increase marks the fourth consecutive quarter of increases. The Zillow Home Value Index rose 3.2% year-over-year to $153,800.
Zillow forecasts a sawtoothed bottom to the housing market, in which home values will log small rises and falls before returning to consistent monthly home value appreciation closer to the long-term historical average.
“We’re likely seeing home values fall back into the negative range in some markets due to the close of the traditional home-buying season,” said Zillow chief economist Stan Humphries. “While that doesn’t mean the recovery has come off the rails — in fact, most markets have hit bottom — it does present a confusing environment for consumers. Looking forward, we expect to see home values bump along the bottom for some time, before increasing at a slow and steady pace.”
As an example of the uneven recovery, Zillow points to Phoenix and Atlanta.
In the Phoenix metro area, home values rose 5.9% quarter-over-quarter, and increased 20.4% year-over-year. But in the Atlanta metro, home values fell 2.2% quarter-over-quarter and declined 4.8% year-over-year.
More metro areas showed decreasing quarterly values in the third quarter than in the second quarter as the home-buying season came to an end.
Zillow's home value forecast calls for home values to increase by 1.7% by the third quarter of 2013.
Looking ahead, the Zillow Home Value Forecast shows U.S. home values will increase 1.7% over the next year, and that 183 of the 252 markets covered by the forecast have hit a bottom. An additional 41 markets are expected to hit a bottom in the next year.