Zillow’s Home Value Index is suggesting that year-over-year home values are on the decline in more places than we’ve seen in quite a while. Of the nearly 900 metro areas they cover, 129 have lower home values in their 5/31/23 estimates than they did the year prior. This same analysis 12 months earlier yielded only 19 metro areas in decline, most of which were small cities seeing small declines.

Today, metros big and small are seeing downward shifts. Of the 50 biggest metro areas, 18 are losing home values, as are 27 of the 100.

Moreover, there seems to be a clear geographic pattern, with nearly the whole Western US seeing falling home values. This could reflect a sort of ripple effect from the California out-migration during Covid that resulted in historically fast home value increases in neighboring states like Idaho, Nevada, Utah, and Arizona. As in-migration slowed in these states, perhaps the frenzied housing markets had a bit of a correction.

Looking ahead, it’s certainly possible to see a west-to-east wave of housing price slowdowns or declines. The fact that so many larger metros in the Midwest and East Coast are already down slightly suggests such a possibility. Plus, Homeworthi’s Home Value Fundamentals Model still sees national home prices as 6% or so above expected, meaning there’s room for downward price action based on historical fundamentals.

But there are many outside factors that can influence home prices both up and down – things like mortgage rates, inventory, wages, and investor involvement that we have to always leave open the prospect of year-over-year home prices improving near term.

Regardless, there are always good investment opportunities in any housing market. The key is knowing what signs to look for and what places to look. As always, Homeworthi is here to help.