Reporting the Convoluted Recovery

Zillow.com, the giant real estate online portal, just released their second quarter Real Estate Market Report. It covers home values, rents, foreclosures, inventory levels, and hazards an outlook for the near future. Let’s take a look at an overview of this report.
In general, national home values rose 6.3% year-over-year from June 2013 to $174,200. The article doesn’t mention it, but this is likely the median, not average price. The last time prices were at this level was back in March of 2005. Rents were up 2.5 percent year-over-year. The largest segment of the report addresses home values.
Home Values
If we assume a steady rate of appreciation at forecasted levels, it will be 2.7 years before home prices nationally climb back to their pre-recession levels. Zillow predicts that half of the 100 largest metro real estate markets will not see pre-crash home price levels for more than three years into the future. Some metro areas will take much longer than that. Nationally, home values remain 11.7 percent below their 2006-2007 peak.
32 of the 35 largest metro markets experienced year-over-year home value increases in June. The exceptions were Kansas City, Indianapolis, and St. Louis. The largest home value increases in June year-over-year were in Las Vegas (22.6%), Riverside (21.4%), Detroit (19.6%) and Atlanta (18.0%).
Rents
The Zillow Rent Index (ZRI) covers 862 areas and shows gains for 649 of those areas in June year-over-year. National rents are up 2.5% from last year. Large markets saw strong rent increases:
• San Jose 13.5%
• San Francisco 11.0%
• Denver 7.9%
• Austin 7.6%
Without some improvement in the economy and jobs numbers, rental demand and rents are expected to continue upward in most markets.
Foreclosure
Foreclosure filings continued to drop in June, with 4.3 out of every 100,000 homes in the U.S. being liquidated. The last period exhibiting this rate of foreclosure activity was in August of 2007. Foreclosure sales as a percentage of all sales fell from 8.8% in May to 8.0% in June. This decline is expected to continue with continued market improvement.
Inventory
Inventories have been low, but the number of listed homes grew by 17.7 percent year-over-year in June on a seasonally adjusted basis. This is the fourth straight month of inventory growth, and inventories increased in 81% of the markets tracked by Zillow. However, inventories are still significantly below normal levels, keeping upward pressure on prices. Low demand is mitigating that pressure however.
Outlook
It’s an uneven market improvement at best, but Zillow is calling for 4.2% appreciation from June 2014 through June 2015. Zillow believes there are four challenges remaining for the housing market:
1. Underwater homeowners still comprise 18.8% of the mortgage homes.
2. Factor #1 is a major reason for continued low inventories.
3. Household formation continues to be well below normal levels.
4. Mortgage rates may be on the rise, possibly keeping homeowners in their current homes.
It is indeed a convoluted recovery.