National residential property values in the United States increased by just 0.2% in January compared with the previous month, confirming expert opinion that after a year of high increases, price growth is likely to be slower this year.
The data from the Zillow Home Value Index shows it is the smallest monthly increase since May 2012. The firm said that more inventory of for sale homes helped slow previously high rates of appreciation.
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 on year inventory.
Inventory rose year on 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 which was up 42.8%, Phoenix up 30.5%, and Sacramento up 26%.
These metros also experienced significant cooling in the pace of home value appreciation in January, 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. 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 home owners decide to list their homes and capitalize on recent gains,’ said Zillow chief economist Stan Humphries.
‘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,’ he added.
The index also shows that year on year 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 with growth of 13.3%, Orlando up 10.3%, and Sacramento up 9%.
National rents rose in January from December, up 0.4% to a Zillow Rent Index of $1,307. Year on year, national rents were up 2.8% in January.
This article was republished with permission from Property Wire.