Home Values to Log Best Year Since the Housing Bubble

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With the help of favorable interest rates and low inventory levels, the real estate market has been one of the strongest areas of the economy in recent years. A rebound in home values has lifted millions of homeowners from underwater status and boosted confidence across the industry. However, the rapid pace should not be expected to last next year.

Home values remain strong as we close out 2013, but the pace is slowing. In November, home values jumped 7.1 percent from a year earlier, according to the latest report from Zillow. That is down slightly from the appreciation peak of 7.3 percent made in the summer selling season. On an annual basis, 88 percent of metros in the United States experienced home value appreciation.

“Much of this year’s rapid growth in home values can be attributed to very strong demand, as low mortgage interest rates, relatively low home prices, and a slowly improving economy helped draw buyers into the market,” said Zillow Chief Economist Dr. Stan Humphries. “Those dynamics are now giving way to more moderating influences, including rising mortgage interest rates, flagging investor demand, and slowly increasing for-sale inventory. This slowdown in home value appreciation will contribute to a more balanced market and will help to ease some emerging affordability problems in a handful of very hot markets, particularly in California.”

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