Home values rose for the second month in a row in April, and saw the biggest increase since January 2006. The Zillow Home Value Index rose 0.7% from March to April, to $147,300.
It’s another positive sign for the housing market, and continued increases will mean a drop in the number we put out yesterday, which showed 31.4% of homeowners with mortgages are underwater.
Of course, as demand heats up, we’re seeing an even more interesting dynamic in the housing market. Many want to buy, but not enough homeowners are selling. Negative equity at least partially explains that. Because it ties homeowners to their homes, making it more difficult to sell. In turn, that can mean not enough homes for hungry buyers.
Our chief economist Dr. Stan Humphries explains it further: “The housing market continues to show positive signs, with home values increasing significantly in April. The recovery is moving in the right direction, but we caution that negative equity will cast a long shadow over the housing market. With almost one-third of homeowners with mortgages underwater and unable to sell their homes, inventory is having a hard time keeping up with increasing demand in many areas. We’ll continue to watch this signal as increasing home values turn from a blip into a trend.”