Real Estate

U.S. homes reach first cumulative value gain since 2006

For the first time in more than five years, U.S. homes are expected to gain more than $1.3 trillion in cumulative value this year, according to Zillow (Z).  

This cumulative home value gain is the first annual increase since homes gained $483 billion in value six years ago. From 2007 to 2011, cumulative home values dropped each year, the largest drop occurred in 2008 when homes lost more than $3.2 trillion in value.

Gains are calculated by determining the difference between the cumulative home values at the end of 2011 and expected cumulative values at the end of 2012. Last year, home values dropped $792 billion from 2010.

“After a sluggish 2011, the housing market really turned a corner in 2012, as historic affordability and sustained investor interest helped keep demand at a boil,” said Zillow Chief Economist Dr. Stan Humphries.

Zillow analyzed 177 metros areas for its study, with more than 75% experiencing home value gains in 2012. Philadelphia was the only large metro area that failed to record an annual gain.

The metros that saw the largest gains in value include Los Angeles, San Francisco, San Jose, Calif., Phoenix and Miami-Fort Lauderdale. This report only strengthens the evidence that these metros are seeing the healthiest housing recovery overall.

Carrington Mortgage Holdings Executive Vice President Rick Sharga told HousingWire there are several factors that are pushing this cumulative value gain.

“In terms of this year, I think there are three factors that are driving up home prices,” Sharga said. “One is that we’re seeing a different mix of properties being sold; particularly fewer distressed properties and more short sales compared to REO sales. Secondly, the inventory levels are just unbelievably low right now. The third reason is investor activity. About 30% of the deals right now are through investors. They are willing to pay market value and, in some cases, even more to see future appreciation. I think the recovery was accelerated by those three factors.”

Zillow expects national home values to appreciate 2.5% from last month to November 2013. While the full report won’t be released until the end of this month, Zillow experts project home prices will increase 3.1% in 2013.

“In terms of 2013, I do think the housing market has turned the corner. I think this is a sustainable recovery, but we have to keep the numbers in perspective,” said Sharga. “Even with the price levels we’ve seen this year, we’re still only back at 2003 price levels. Given that, I think we’ll continue to see improvement in 2013.”

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