Home price gains are slowing after a strong bounce off the bottom, potentially marking a new phase for the housing recovery.
Home values aren't rising as fast as they were and even dipped in a few hot markets in September, according to Zillow. More homes are coming on the market, and Realtors report less competition among buyers.
"It's a market in flux," says Sherry Chris, CEO of Better Homes and Gardens Real Estate. "We are in year two of a long-term recovery, and there will be bumps."
Home value gains are a key indicator of a market shift.
U.S. home values were up 1.2% in the third quarter from the second, Zillow data show. That's down from a 2.5% jump in the second quarter from the first.
In September, values dipped about 1% from August in Los Angeles and San Diego — the first notable month-to-month drop for those markets since the recovery started, Zillow says.
All told, half of 30 major metropolitan areas covered by Zillow saw values fall in September from August, seasonally adjusted numbers show. Earlier this summer, all the same metros were seeing month-to-month gains.
More markets are likely to see declines this month, too, says Svenja Gudell, Zillow chief economist.
Home values were flat or slightly up in September from August in Washington, D.C., Miami and Atlanta, Zillow's data show. But growth has slowed in the metros each month since July.
In Atlanta, for instance, July values were up 3.1% from June. But September saw only a 0.7% bump from August, after being adjusted for seasonal factors.
While down, that's still rapid appreciation. Historically, homes have appreciated an average of 0.3% a month, says Jed Kolko, Trulia economist.
"It's not like prices are falling off a cliff. They're just slowing to a more sustainable pace," Guddell says.
Fewer investor buyers and more inventory are two key factors affecting prices.
The number of existing single-family homes for sale in August was up 5% from January, seasonally adjusted, Kolko says. Meanwhile, higher prices have dampened investor activity, leaving more homes for regular buyers, he says.
While popular homes got 10 to 15 offers several months ago, two to three are more likely now, says Better Homes' Chris.
Slowing price gains should lessen fears of housing bubbles in some markets, including in California, Zillow says. Homes are also taking longer to sell in some California markets.
Homes spent a median of 28 days on the market in Oakland, in September before being sold, up from 14 days earlier this year, reports Realtor.com, which tracks 146 markets.
Rising prices have created more sellers. "The market is still strong," but hitting more of an equilibrium between buyers and sellers, says Errol Samuelson, Realtor.com president.