US property values still fall but rental market is flourishing

Residential property prices in the United States continued to fall but median rents are rising, according to the latest real estate market reports published today (Tuesday 13 March) by Zillow.

The Zillow Rent Index, which was released for the first time, shows that median rents increased 3% from January 2011 to January 2012. There were gains for 69.2% of metropolitan areas covered by the ZRI.

By contrast, only 7.3% of metro areas covered by the Zillow Home Value Index saw home values rise. Overall home values continued to fall, declining 4.6% year on year.

In some large markets, rents rose almost as much as values fell. In the Chicago metro, the ZRI rose 9.1% year on year, while home values fell 10.4% during the same period. In the Minneapolis St. Paul metro, rents rose 11% and home values fell 8.1%.

‘The flourishing rental market is the silver lining to the nation's housing downturn. We haven't had a good way to quantify what is happening with rental rates until now, and the inaugural Zillow Rent Index shows us a healthy and growing rental market across the majority of the country, even as home values continue to fall,’ explained Zillow chief economist Dr. Stan Humphries.

‘While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals. That, in turn, will lower the number of homes on the market, which will eventually help put a floor under the value of all homes.

Moreover, rising rents increase demand as buying becomes more attractive than renting because of low purchase prices and higher rents,’ he added.

In the short term, national monthly rents declined slightly from December 2011 to January 2012, falling 0.3% to $1,218. Home values fell 0.5% during the same period to $146,200.Additionally, foreclosures ticked up slightly in January, when lenders foreclosed 8.4 out of every 10,000 homes. That was up from December, when 8.1 out of every 10,000 homes were foreclosed.

Foreclosure re-sales also rose on both a month on month and year on basis. Nearly one in five, some 19.5%, of homes sold in January were foreclosure re-sales.

The indices also show that dome of the steepest price falls have been in Atlanta where they were down 11.3% year on year, followed by Chicago, down 10.4%.

The highest year on year rental increases were in Philadelphia, up 12.1% and Minneapolis St Paul, up 11%.

The least price falls were seen in Pittsburgh, down 0.2%, Washington down 1%, and Denver down 1.9%.