Zillow: Housing Recovery Takes Off in Q2

After a somewhat slow first quarter, the national housing recovery took the pace up a few notches in Q2, ""Zillow"":http://www.zillow.com/ reported.

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According to the company's second-quarter Real Estate Market Reports, the U.S. Zillow Home Value Index (HVI) rose to $161,100 as of the end of June--up 2.4 percent quarter-over-quarter and 5.8 percent year-over-year.

The second quarter's increase was the largest annual gain since August 2006 and the largest quarterly gain since the fourth quarter of 2005--as well as the second-largest quarterly gain since 2004. National home values rose only 0.25 percent during the first quarter.

While home value appreciation accelerated in Q2, it also spread to more areas across the country, reaching markets in the Northeast, Midwest, and Southwest that had previously had trouble keeping pace.

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All of the top 30 largest metros covered by Zillow saw annual appreciation as of the end of the second quarter, and Zillow believes all are coming back from their respective troughs.

Metros with the largest annual gains in Q2 included Sacramento (29.5 percent), Las Vegas (29.4 percent), and San Francisco (25.5 percent).

While some areas--particularly those where annual appreciation is approaching 30 percent--may seem like they're experiencing a bubble, Zillow senior economist Svenja Gudell explained that kind of market behavior won't last.

""Investors are starting to pull out of some markets and regular buyers are coming back, and more inventory is slowly but surely coming on line, both of which will contribute to slowdowns in appreciation,"" Gudell explained. ""Additionally, in some overheated markets, rapid home value increases coupled with rising mortgage rates will lead to housing prices and financing costs outpacing local income growth, which will also contribute to a moderation of the market.""

Over the next 12 months, Zillow expects home values to rise another 5 percent. Of the 30 largest markets, 29 are expected to see appreciation, with New York being the only exception.

In the rental market, national rents fell quarter-over-quarter by 0.5 percent to $1,282--the first quarterly decline after nine consecutive quarters of rents either increasing or remaining flat. Year-over-year, national rents were up 1.6 percent as of the end of the second quarter.