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Zillow: Home Price Growth Moderates in Q1

After ""months of robust and largely unsustainable annual home value appreciation,"" the national housing market finally showed signs of moderation in this year's first quarter, ""Zillow"":http://www.zillow.com/ reported Thursday.

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Zillow's Home Value Index (HVI) rose to $157,600 as of the end of Q1, up 0.5 percent over Q4 2012 and 5.1 percent over the same time last year. Quarterly home value appreciation in the fourth quarter was 2.1 percent--indicating the market is slowing down to a more sustainable pace, says Zillow chief economist Dr. Stan Humphries.

""The national housing market has rebounded strongly over the past year. But the sometimes dramatic home value run-ups experienced during these months were never expected to be sustainable, and recent slowdowns are indicative of a market that is slowly finding its natural level,"" Humphries said.

Not all markets saw a slowdown in growth, however. According to Zillow, five metros tracked by the company experienced year-over-year appreciation of more than 20 percent: Phoenix (up 24 percent); Las Vegas (up 22.3 percent); San Jose (up 22.1 percent); San Francisco (up 21.4 percent); and Sacramento (up 20.1 percent).

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In addition, seven of the top 30 metros covered by Zillow saw a decline in home values last quarter, ""[f]urther underscoring the unevenness of the recovery,"" the company reported. The New York metro posted a decline of 0.3 percent after three straight quarters of positive growth, while the Chicago area experienced depreciation of 1.4 percent after a flat fourth quarter in 2012.

In the rental market, national rents rose 0.9 percent quarter-over-quarter and were 4.9 percent over Q1 2012. Zillow's Rent Index stood at $1,290 as of March 31.

Seattle-based Zillow also found an increase in foreclosure rates, with 5.11 out of every 10,000 homes lost to foreclosure in the first quarter, down from 1.3 homes in the previous quarter and 2.4 homes year-over-year. Zillow explained the rise is ""likely because of a seasonal acceleration after the traditionally slow holiday period.""

According to Zillow's research, housing markets can expect annual home value appreciation of roughly 3 percent, historically speaking. Looking ahead, the company's Home Value Forecast shows national home values rising 3.2 percent through March 2014, an annual appreciation rate more in line with historic norms.

""Looking forward, we expect annual home value appreciation to continue to slow, as more inventory comes up for sale. But pockets of very rapid appreciation will remain, a troubling sign of volatility and a potential future headache as affordability is compromised and homes begin to look much more expensive to average buyers,"" Humphries said. ""This affordability issue may become acute in many markets in a couple years once mortgage rates begin to return again the normal levels.""

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