Intense Demand and Low Mortgage Rates Drive Home Values to Record Highs

Rhea-AI Summary

Zillow's latest market report highlights a robust housing market driven by low mortgage rates and demographic shifts as of January 2021. The Zillow Home Value Index reached $269,039, reflecting a 9.1% annual increase, the highest since June 2006. Homes are selling quicker, averaging 18 days on the market, a significant drop from previous years. Despite rising home values, rents remain relatively stagnant, increasing only 0.5% year-over-year. Zillow forecasts home values to grow by 10.1% in the next year, anticipating existing home sales to hit 7 million, a 24.8% rise from 2020.

Positive

• Zillow Home Value Index rose to $269,039, a 9.1% annual increase, highest since June 2006.
• Homes are selling faster, averaging 18 days on the market, 28 days quicker than in 2020.
• Zillow forecasts a 10.1% growth in home values over the next year.
• Expected existing home sales of 7 million in 2021, up 24.8% from 2020.

Negative

• For-sale inventory decreased by 26.3% compared to the previous year.

SEATTLE, Feb. 19, 2021 /PRNewswire/ -- Extreme demand driven by exceptionally low mortgage rates, demographic pressures and pandemic trends kept the housing market boiling as we moved into 2021, according to Zillow's® latest market report. 

Monthly appreciation of home values in January matched recent record highs, while annual growth is higher than any time since 2006. Home sales are moving briskly, with homes typically staying on the market for 18 days as of mid-January before the seller has accepted an offer from a buyer -- 28 days faster than in 2020 and 2019. For-sale inventory declined again in January, and now stands 26.3% below levels from a year ago.

The Zillow Home Value Index (ZHVI) rose to $269,039 in January, up 1.1% month over month, matching December's all-time record for monthly growth in data reaching back to 1996. Annual home value appreciation was 9.1% -- the largest annual growth recorded since June 2006, before the Great Recession.

"Homebuying demand has pushed the pedal to the metal for price appreciation this winter," said Jeff Tucker, senior economist at Zillow. "Normally we'd be talking about the spring selling season ramping up, but it looks more like last summer's selling season simply never ended. Buyers eager to secure more space and lock in today's rock-bottom interest rates are having to move quickly and aggressively to win out in this competitive market."

Home values rose in all 50 of the largest U.S. metros, with the most drastic yearly growth in Phoenix (17.1%), San Jose (14.2%) and Austin (13.7%). The slowest growth -- a relative term in this case -- was seen in San Francisco (5.3%), Chicago (6.7%), and San Antonio (6.7%). 

A few major demand drivers are keeping competition high and the market hot through the customarily cool winter. For one, a wave of millennials are now entering their peak home-buying years. The number of Americans aged 25-34 was 12% higher in July 2020 than July 2010, according to Census estimates -- an increase of approximately 4.9 million people. 

Another is mortgage rates, which averaged 2.74% for a standard 30-year fixed in January -- up slightly from a historic low of 2.68% in December. These rates are making monthly mortgage payments more affordable as a percentage of income, even when considering rising prices. 

The COVID-19 pandemic and widespread changes to work-from-home policies have also pushed many to reconsider what they want and need in their living space, and where it should be. 

Looking forward, Zillow economists expect home values to grow 10.1% in the next 12 months. The Zillow forecast for existing home sales has been revised up since December, driven by improved pending sales volumes and home purchase applications. Existing home sales are expected to reach 7 million in 2021, 24.8% more than in 2020. 

While home prices are rising quickly, rents are relatively stagnant. The Zillow Observed Rent Index (ZORI) was $1,721 in January, just 0.5%, or $9, higher than in January 2020 and up 0.3% month over month. 

Rents in many expensive, coastal metros are currently much lower than a year ago -- down 9.2% in San Francisco, 8.8% in New York, 7.2% in San Jose, and 6.3% in Boston. Many Sun Belt and Midwest metro areas, on the other hand, saw solid rent growth. Phoenix led the largest 35 metro areas with 8.4% annual rent growth, followed by Sacramento (7.6%) and Indianapolis (6.9%).

Metropolitan Area*	Zillow Home Value Index, January 2021	ZHVI - YoY Change, January 2021	Zillow Observed Rent Index, January 2021	ZORI - YoY Change, January 2021
United States	$269,039	9.1%	$1,721	0.5%
New York, NY	$516,732	7.7%	$2,465	-8.8%
Los Angeles-Long Beach-Anaheim, CA	$748,532	9.6%	$2,542	-0.8%
Chicago, IL	$259,459	6.7%	$1,614	-2.9%
Dallas-Fort Worth, TX	$273,348	7.9%	$1,555	2.0%
Philadelphia, PA	$277,775	10.6%	$1,578	2.3%
Houston, TX	$231,195	7.0%	$1,464	0.4%
Washington, DC	$475,850	8.6%	$2,006	-3.4%
Miami-Fort Lauderdale, FL	$323,431	7.7%	$1,913	2.1%
Atlanta, GA	$264,565	9.7%	$1,602	5.7%
Boston, MA	$539,592	9.4%	$2,277	-6.3%
San Francisco, CA	$1,178,615	5.3%	$2,876	-9.2%
Detroit, MI	$198,979	10.3%	$1,293	6.1%
Riverside, CA	$433,226	11.7%
Phoenix, AZ	$335,975	17.1%	$1,572	8.4%
Seattle, WA	$594,223	12.8%	$1,866	-5.5%
Minneapolis-St Paul, MN	$320,438	8.6%	$1,543	0.8%
San Diego, CA	$689,361	13.5%	$2,383	4.3%
St. Louis, MO	$197,073	9.0%	$1,093	3.8%
Tampa, FL	$257,499	12.8%	$1,589	6.6%
Baltimore, MD	$319,175	8.2%	$1,646	2.2%
Denver, CO	$488,746	9.0%	$1,709	0.1%
Pittsburgh, PA	$178,282	10.4%	$1,177	1.2%
Portland, OR	$458,486	9.7%	$1,649	1.2%
Charlotte, NC	$265,397	10.9%	$1,514	3.1%
Sacramento, CA	$478,817	11.3%	$1,916	7.6%
San Antonio, TX	$222,816	6.7%	$1,330	2.5%
Orlando, FL	$276,168	7.5%	$1,594	2.2%
Cincinnati, OH	$208,352	12.0%	$1,259	5.5%
Cleveland, OH	$176,069	11.1%	$1,121	3.7%
Kansas City, MO	$227,059	10.6%	$1,193	5.0%
Las Vegas, NV	$315,966	8.0%	$1,493	6.7%
Columbus, OH	$234,276	10.8%	$1,278	5.2%
Indianapolis, IN	$204,141	11.3%	$1,262	6.9%
San Jose, CA	$1,314,799	14.2%	$2,892	-7.2%
Austin, TX	$384,446	13.7%	$1,511	-1.2%
Virginia Beach, VA	$264,060	8.3%	$1,376	6.1%
Nashville, TN	$304,571	8.9%	$1,595	1.9%
Providence, RI	$357,761	12.0%	$1,603	8.2%
Milwaukee, WI	$219,381	12.1%	$1,169	2.7%
Jacksonville, FL	$252,678	9.4%	$1,370	5.6%
Memphis, TN	$174,063	11.3%	$1,337	10.0%
Oklahoma City, OK	$170,138	7.5%	$1,098	3.9%
Louisville-Jefferson County, KY	$197,548	8.7%	$1,044	4.7%
Hartford, CT	$260,546	9.5%	$1,353	5.0%
Richmond, VA	$268,405	8.4%	$1,294	4.8%
New Orleans, LA	$224,193	7.9%	$1,290	3.8%
Buffalo, NY	$193,583	11.4%	$1,124	5.3%
Raleigh, NC	$307,481	8.8%	$1,503	2.6%
Birmingham, AL	$188,327	9.8%	$1,129	5.5%
Salt Lake City, UT	$436,390	13.7%	$1,408	3.3%

*Table ordered by market size 

About Zillow Group

Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. 

As the most-visited real estate website in the U.S., Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and nearly seamless end-to-end service. Zillow Offers® buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans™, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Zillow recently launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.  

Zillow Group's affiliates and subsidiaries include Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). 

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SOURCE Zillow

FAQ

What is the current Zillow Home Value Index value for January 2021?

The Zillow Home Value Index for January 2021 is $269,039.

How much did home values grow year-over-year according to Zillow?

Home values grew by 9.1% year-over-year as of January 2021.

What are the forecasts for existing home sales in 2021 by Zillow?

Zillow forecasts existing home sales to reach 7 million in 2021, a 24.8% increase from 2020.

How long are homes staying on the market according to Zillow's January report?

As of mid-January 2021, homes are averaging 18 days on the market.

What is the expected growth in home values over the next year?

Zillow expects home values to grow by 10.1% in the next 12 months.