The FINANCIAL -- Booming West Coast markets Seattle and San Jose, Calif. are leading the nation in home value growth. After one of the most competitive home shopping seasons in recent history, demand for homes in the West remains high as people flood the area for jobs.
Nationally, home values are 6.9 percent more expensive than a year ago, with the median U.S. home now worth $202,700, according to the September Zillow Real Estate Market Report.
Seattle and San Jose reported double-digit home value appreciation over the past year. In Seattle, home values are 12.4 percent higher than at this time last year, and home values are just over 10 percent higher in San Jose. Following these two metros in home value growth are Las Vegas, Charlotte, N.C. and Orlando, Fla. This is the ninth month in a row that Seattle home values have been the fastest growing in the nation.
Home shopping season has ended, but demand for homes remains high, while inventory remains at record-level lows. According to the 2017 Zillow Group Consumer Housing Trends Reportii, the typical buyer spends just over four months searching, and almost half of all buyers don't get the first home on which they make an offer. Housing markets on the West Coast are exceptionally tight, but the theme of tight inventory echoes across the country.
"In these West Coast markets, heightened demand is being met with limited supply of homes for sale, which naturally causes prices to rise," said Zillow Chief Economist Dr. Svenja Gudell. "That limited supply and high demand dynamic is a widespread phenomenon impacting high-growth metros like Seattle, as well as slower-moving markets, like Indianapolis. It might be easy to assume another bubble is emerging, with home values growing 10 or 12 percent per year, but don't worry. The market is reacting to basic economic laws, and is behaving exactly the way we would expect it to given good overall growth, limited supply of homes for sale and decent housing affordability thanks to low mortgage interest rates."
Rental prices on the West Coast are also rising rapidly. Riverside, Calif. and Seattle reported the greatest annual rent appreciation among the 35 largest U.S. metros. In Riverside, rent is 6 percent more expensive than at this time last year, and 5.5 percent more expensive in Seattle. The median rental price in the U.S. is $1,430 per month, up 2 percent over the past year.
Tight inventory and strong demand are two factors driving up home values; across the U.S., there are 12 percent fewer homes to choose from than a year ago. Inventory has dropped most significantly in San Jose, Seattle and San Diego over the past year. In San Jose, there are 60 percent fewer homes on the market than at this time last year, and 35 percent fewer in Seattle and San Diego.
Mortgage ratesiii on Zillow ended the month of September at 3.70 percent, the lowest month-ending rate since May 2017. Mortgage rates on Zillow hit a high of 3.72 percent in the last few days of the monthiv with the month low at 3.56 percentv. Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.