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HOUSING MARKET OVERVIEW 2018 Q3Zillow Economic Research
ZILLOW HOUSING MARKET OVERVIEW | PAGE 2
HOME VALUES AND RENTS
• U.S. home values are growing at a steady pace, and have surpassed pre-recession highs nationally and in a number of large markets. Driven largely by limited inventory and high demand, home values are growing fastest at the bottom end of the market.
• Regionally, markets in the Pacific Northwest, Texas, Florida and parts of the Southwest continue to outperform slower-moving markets in the Midwest and Mid-Atlantic.
• Growth in U.S. rents has slowed considerably over the past couple of years and has largely stabilized. Pockets of strong rent appreciation remain in the Pacific Northwest and California.
ZILLOW HOUSING MARKET OVERVIEW | PAGE 3
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
$100K
$110K
$120K
$130K
$140K
$150K
$160K
$170K
$180K
$190K
$200K
$210K
$220K
Zill
ow
Ho
me
Val
ue In
dex
$220,100
May 2007$200,500
February 2012$148,600
Trough-to-Current+48.1%
U.S. home values have surpassed pre-recession highs.
Source: Zillow Home Value Index (September 2018).
+48.1% +7.6%Trough-to-Current Year-over-Year
Zillow Home Value Index
ZILLOW HOUSING MARKET OVERVIEW | PAGE 4
1999 2004 2009 2014 2019
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Yea
r-o
ver-
Yea
r C
hang
e in
ZH
VI
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Mo
nth-
ove
r-M
ont
h C
hang
e in
ZH
VI
7.6%
0.4%
Annual Home Value Growth Monthly Home Value Growth
The pace of annual U.S. home value growth has accelerated over the past few years.
Source: Zillow Home Value Index (September 2018).
Zillow Home Value Index, Annual and Monthly Growth
ZILLOW HOUSING MARKET OVERVIEW | PAGE 5
Washington, DC3.7%
Tampa, FL9.9%
Seattle, WA7.4%
San Jose, CA20.9%
San Francisco, CA9.8%
Sacramento, CA4.8%
Pittsburgh, PA7.1%
Phoenix, AZ7.3%
Philadelphia, PA4.7%
Orlando, FL9.7%
New York, NY5.2%
Los Angeles, CA5.4%
Las Vegas, NV15.4%
Kansas City, MO9.1%
Houston, TX6.3%
Detroit, MI9.2%
Denver, CO6.2%
Columbus, OH7.9%
Boston, MA6.2%
Austin, TX6.6%
St. Louis, MO5.4%
San Diego, CA5.9%
Portland, OR4.9% Minneapolis, MN
6.8%
Miami, FL8.0%
Dallas, TX10.7%
Cincinnati, OH7.2%
Chicago, IL5.3%
Charlotte, NC10.5%
Atlanta, GA12.3%
3.7% 20.9%Annual Home Value Growth
Markets in the Pacific Northwest, Texas and Florida continue to outperform slower-moving markets in the Midwest and Mid-Atlantic.
Source: Zillow Home Value Index (September 2018).
Annual Home Value Growth
ZILLOW HOUSING MARKET OVERVIEW | PAGE 6
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%Expected Home Value Appreciation Through September 2019
Boston, MA
Dallas, TX
Detroit, MI
Atlanta, GA
Chicago, IL
San Francisco, CA
Tampa, FL
New York, NY
United States
Minneapolis, MN
Philadelphia, PA
Miami, FL
Seattle, WA
St. Louis, MO
Los Angeles, CA
San Diego, CA
Baltimore, MD
Riverside, CA
Washington, DC
Phoenix, AZ
Houston, TX 2.8%3.3%3.4%
3.7%3.8%
4.6%5.1%5.1%
5.3%5.5%
5.6%5.9%
6.4%6.9%7.0%7.1%
7.7%8.6%
8.8%9.1%
6.4%
Home value growth is expected to slow over the next 12 months.
Source: Zillow Home Value Forecast, Top 20 Metros (September 2018).
Zillow Home Value Forecast
ZILLOW HOUSING MARKET OVERVIEW | PAGE 7
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018$0K
$50K
$100K
$150K
$200K
$250K
$300K
$350K
$400K
Zill
ow
Ho
me
Val
ue In
dex
$382,400
$220,100
$125,300
Bottom Third Median Home Values Top Third
Zillow Home Value Index, by Thirds
Source: Zillow Home Value Index (September 2018).
Homes valued in the bottom-third of the market are growing in value the fastest.
ZILLOW HOUSING MARKET OVERVIEW | PAGE 8
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Ann
ual H
om
e V
alue
Gro
wth
10.0%
4.7%
7.6%
Bottom Third Median Home Values Top Third
Annual Home Value Appreciation, by Thirds
Source: Zillow Home Value Index (September 2018).
Home value appreciation among homes valued in the bottom third has slowed somewhat, but the annual pace of growth is still more than double that of top-third homes.
ZILLOW HOUSING MARKET OVERVIEW | PAGE 9
2011 2012 2013 2014 2015 2016 2017 2018 2019
$1,240
$1,260
$1,280
$1,300
$1,320
$1,340
$1,360
$1,380
$1,400
$1,420
$1,440
Zill
ow
Ren
t In
dex
$1,440
Annual growth in rents has slowed since the beginning of 2018.
Source: Zillow Rent Index (September 2018).
Zillow Rent Index
ZILLOW HOUSING MARKET OVERVIEW | PAGE 10
2012 2013 2014 2015 2016 2017 2018 2019
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Ann
ual R
ent
Gro
wth
-0.2%
For the first time in six years, median rent is less than it was 12 months earlier.
Source: Zillow Rent Index (September 2018).
Zillow Rent Index
ZILLOW HOUSING MARKET OVERVIEW | PAGE 11
Washington, DC-0.9%
Tampa, FL1.4%
Seattle, WA-2.2%
San Jose, CA-0.9%
San Francisco, CA-0.6%
Sacramento, CA1.8%
Pittsburgh, PA-1.0%
Phoenix, AZ0.4%
Philadelphia, PA-1.7%
Orlando, FL1.0%
New York, NY-1.9%
Los Angeles, CA0.8%
Las Vegas, NV1.4%
Kansas City, MO-1.4%
Houston, TX0.1%
Detroit, MI0.3%
Denver, CO0.0%
Columbus, OH0.4%
Boston, MA-1.6%
Austin, TX-1.6%
St. Louis, MO-1.2%
San Diego, CA0.0%
Minneapolis, MN0.5%
Miami, FL0.1%
Dallas, TX-0.6%
Cincinnati, OH-0.4%
Chicago, IL-1.9%
Charlotte, NC0.0%
Atlanta, GA0.7%
-2.2% 1.8%
Annual Rent Growth
The annual pace of rent growth is largely sustainable in most large markets.
Source: Zillow Rent Index (September 2018).
Annual Rent Appreciation
ZILLOW HOUSING MARKET OVERVIEW | PAGE 12
2012 2014 2016 2018
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
Zill
ow
Ren
t In
dex
$1,414
$1,553
2013 2015 2017 2019-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Yo
Y
-1.0%-1.1%
Multifamily Units Single-Family Homes
Rents for single-family homes and units in larger multifamily buildings share similar trends.
Source: Zillow Rent Index (September 2018).
Multifamily and Single-Family Home Rents
ZILLOW HOUSING MARKET OVERVIEW | PAGE 13
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%Expected Rent Appreciation Through September 2019
Riverside, CA
New York, NY
Minneapolis, MN
Boston, MA
Atlanta, GA
United States
Seattle, WA
Los Angeles, CA
Tampa, FL
Baltimore, MD
San Diego, CA
Dallas, TX
Miami, FL
Phoenix, AZ
Detroit, MI
Philadelphia, PA
Houston, TX
Washington, DC
St. Louis, MO
San Francisco, CA
Chicago, IL
-0.4%
-0.6%
-0.7%
-0.1%
-0.1%
-0.1%
0.6%
0.8%
0.8%
0.8%
0.5%
2.0%
2.5%
1.0%
1.4%
1.4%
1.3%
2.1%
1.1%
1.1%
1.1%
Rental appreciation varies regionally.
Source: Zillow Rent Forecast (September 2018).
Zillow Rent Forecast
ZILLOW HOUSING MARKET OVERVIEW | PAGE 14
HOUSING AFFORDABILITY• Overall, mortgage affordability – the share of income necessary to afford
a typical mortgage payment – looks reasonable in most markets. But affordability is declining, especially at the bottom end of the market, as home values nd interest rates rise and incomes fail to keep pace.
• As mortgage interest rates rise, some would-be home sellers with lower mortgage interest rates may decide not to sell and instead stay in their current home, choosing not to give up a lower monthly payment. This phenomenon of “mortgage rate lock-in” could end up negatively impacting inventory.
• Unlike mortgage affordability, rental affordability is worse today than it was historically, though the recent slowdown in rent growth has helped somewhat.
• Poor rent affordability is worrisome, as more money devoted to rent makes it more difficult to save for homeownership.
ZILLOW HOUSING MARKET OVERVIEW | PAGE 15
1988 1993 1998 2003 2008 2013 201812%
14%
16%
18%
20%
22%
24%
26%
28%
30%
24.4%
22.0%
19.7%
28.2%
17.7%
Average Share of Income Spent on Rent, 1985-2000
Average Share of Income Spent on Mortgage, 1985-2000
Historic MortgageAffordability,1985-2000
MortgageAffordability, 2018
Q3
Forecasted at 5%Rates
Forecasted at 6%Rates
Forecasted at 7%Rates
Historic RentAffordability,1985-2000
Rent Affordability,2018 Q3
28%26%24%22%20%18%21%
Share of Income Spent on Housing
Nationwide, the share of income spent on a mortgage is well below historic norms.
Source: Zillow Mortgage Affordability, Zillow Rent Affordability (2018 Q3).
Zillow Mortgage and Rent Affordability
ZILLOW HOUSING MARKET OVERVIEW | PAGE 16
Weak income growth and rapid appreciation, even with very low mortgage interest rates, means homes are becoming more unaffordable, more quickly for buyers of homes valued in the bottom third.
Source: Zillow Mortgage Affordability (2018 Q2).
Zillow Mortgage Affordability, by Thirds
2000 2002 2004 2006 2008 2010 2012 2014 2016 20180.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Sha
re o
f In
com
e S
pen
t o
n M
ort
gag
e
12.9%
15.4%
23.9%
Bottom Third Middle Third Top Third
ZILLOW HOUSING MARKET OVERVIEW | PAGE 17
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018$0K
$10K
$20K
$30K
$40K
$50K
$60K
$70K
$80K
$90K
$100K
$110K
$120K
$130K
Ho
useh
old
Inco
me
$59,049
$20,960
$126,717
Income growth for the lowest earners has been especially weak.
Source: Zillow analysis of U.S. Census Bureau ACS data, IPUMS (2017 Q2).
Nominal Income Growth,
2000-2016
50.5%Top Third
35.2%Middle Third
30.5%Bottom Third
Household Income, by Thirds
ZILLOW HOUSING MARKET OVERVIEW | PAGE 18Source: Zillow Mortgage Affordability, Zillow Rent Affordability (2018 Q3).
Housing Affordability Table
Region Name Median Income
Mortgage Affordability,
2018 Q3
Historic Mortgage
Affordability, 1985-2000
Forecast Mortgage
Affordability (5% Interest
Rate)
Forecast Mortgage
Affordability (6% Interest
Rate)
Forecast Mortgage
Affordability (7% Interest
Rate)
Rent Affordability,
2018 Q3
Historic Rent Affordability
1985-2000
United States $62,807 17.3% 21.2% 19.2% 21.5% 23.9% 27.5% 25.8%
New York, NY $78,538 27.1% 29.1% 30.0% 33.5% 37.1% 36.2% 26.4%
Los Angeles,CA $72,999 43.8% 34.7% 48.0% 53.6% 59.5% 45.2% 36.3%
Chicago, IL $70,887 15.5% 23.1% 16.9% 18.9% 21.0% 27.7% 25.3%
Dallas, TX $69,924 16.5% 22.8% 18.7% 20.9% 23.2% 27.4% 21.7%
Philadelphia, PA $70,826 16.0% 20.4% 17.8% 19.9% 22.1% 26.5% 21.4%
Houston, TX $65,654 15.1% 20.9% 16.4% 18.4% 20.4% 28.3% 24.3%
Miami, FL $102,978 19.2% 22.6% 20.8% 23.2% 25.7% 24.9% 17.8%
Atlanta, GA $56,215 24.5% 20.3% 26.9% 30.1% 33.4% 39.6% 28.5%
Boston, MA $67,576 15.3% 18.2% 17.4% 19.4% 21.6% 24.8% 19.2%
San Francisco, CA $89,142 25.4% 26.4% 28.9% 32.3% 35.8% 31.9% 26.4%
Detroit, MI $106,777 44.3% 38.6% 49.1% 54.8% 60.8% 38.2% 30.7%
Riverside, CA $60,489 12.8% 16.0% 14.4% 16.1% 17.9% 23.7% 20.0%
Phoenix, AZ $64,800 27.7% 27.9% 30.0% 33.5% 37.2% 35.2% 32.7%
Seattle, WA $64,151 19.9% 21.0% 21.6% 24.1% 26.7% 25.4% 22.7%
Minneapolis, MN $85,406 28.1% 25.9% 30.6% 34.2% 38.0% 30.5% 23.8%
San Diego, CA $79,282 16.4% 17.8% 18.0% 20.1% 22.3% 24.8% 21.3%
St. Louis, MO $79,934 36.4% 33.6% 39.6% 44.2% 49.1% 38.1% 34.6%
Tampa, FL $63,729 12.7% 16.9% 13.9% 15.5% 17.2% 21.4% 21.2%
Baltimore, MD $53,740 19.2% 18.8% 21.4% 23.9% 26.5% 31.0% 27.7%
Denver, CO $79,199 16.6% 21.8% 17.9% 20.0% 22.2% 26.4% 26.9%
ZILLOW HOUSING MARKET OVERVIEW | PAGE 19
INVENTORY, CONSTRUCTION AND DEMOGRAPHICS
• Inventory of homes for sale is very low, and getting lower. Inventory constraints are particularly acute among entry-level and median homes – the exact homes sought by first-time homebuyers and young families.
• New construction has thus far failed to get back to pre-recession levels, especially for single-family homes.
• Homes that are on the market are selling faster – currently, homes spend ten days less on the market before selling than they did a year ago.
• Millennials do value homeownership, but many are finding it difficult to attain, and more young adults are living with their parents.
ZILLOW HOUSING MARKET OVERVIEW | PAGE 20
2013 2014 2015 2016 2017 2018 2019
1,200K
1,250K
1,300K
1,350K
1,400K
1,450K
1,500K
1,550K
1,600K
1,650K
Fo
r-S
ale
Inve
nto
ry
1,266,999
The number of U.S. homes for sale is low, and falling
Source: Zillow For-Sale Inventory (Seasonally Adjusted, Smoothed) (September 2018).
-26.4% -1.9%Peak-to-Current Year-over-Year
Zillow For-Sale Inventory
ZILLOW HOUSING MARKET OVERVIEW | PAGE 21
2013 2014 2015 2016 2017 2018150K
200K
250K
300K
350K
400K
450K
500K
550K
600K
650K
700K
Fo
r-S
ale
Inve
nto
ry
555,040
318,819
233,877
Bottom Tier Middle Tier Top Tier
Inventory shortages are particularly acute among bottom- and middle-third homes.
Source: Zillow For-Sale Inventory (Seasonally Adjusted, Smoothed) (September 2018).
-1.8% +2.3% -3.0%Bottom Third Middle Third Top Third
Year-over-Year % Change
Zillow For-Sale Inventory, by Thirds
ZILLOW HOUSING MARKET OVERVIEW | PAGE 22
2013 2014 2015 2016 2017 20180K
50K
100K
150K
200K
250K
300K
350K
400K
450K
500K
List
ing
s 338,372
373,016
New Listing CountNew Listing Count (Trailing Twelve Month Average)
The number of listings hitting the market has remained consistent
Source: Zillow Listing Data (September 2017).
New Homes Listed For Sale
ZILLOW HOUSING MARKET OVERVIEW | PAGE 23
2010 2011 2012 2013 2014 2015 2016 2017 2018 20190
20
40
60
80
100
120
140
Day
s o
n Z
illo
w
72
Homes listed for sale are selling more quickly than in the past few years.
Source: Zillow Days on Zillow, Including REOs (September 2018).
Days on Zillow
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