A summer-long cool-down in the pace of home value appreciation is helping a handful of markets step back from the edge of bubble territory, according to the third quarter Zillow Real Estate Market Reports. The U.S. Zillow Home Value Index stood at $163,000 at the end of the third quarter, up 6.4 percent year-over-year and 1.2 percent from the end of the second quarter, but unchanged from August. The quarterly pace of appreciation was roughly half that experienced in the second quarter.
At the end of the third quarter, the national pace of monthly home value appreciation had fallen in each of the past three months, and turned negative in San Diego, -1.2 percent; Los Angeles, -1.1 percent; and San Francisco, -0.1 percent, , after reaching into the 3-percent range in all three metros just a few months ago. Among the top 30 largest metro areas covered by Zillow, half showed monthly depreciation at the end of the third quarter. As recently as July, all of the top 30 metro areas showed positive monthly appreciation, with none exhibiting a monthly pace slower than 1 percent month-over-month.
Despite falling monthly appreciation, home values in most areas continue to grow year-over-year. All 30 of the largest metro areas experienced annual gains in September, with the largest coming in Sacramento, Calif., 34.1 percent; Las Vegas, 33.3 percent; and Riverside, Calif., 31.8 percent. Annual appreciation is expected to slow markedly over the next 12 months as moderation spreads, to an annual pace of 3.8 percent nationwide by September 2014, according to the Zillow Home Value Forecast.