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Home values rose 5.9% in 2012, growth rate unsustainable

Home values improved in 2012, but the rate of improvement is unsustainable, according to Zillow, and after finding its bottom, housing is finally moving along the long road to recovery.

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2012 a good year for home values

According to the fourth quarter Zillow Home Value Index, home values rose 5.9 percent in 2012 to $157,400, also rising 2.5 percent from the third quarter, marking the fourth consecutive quarter of home values rising.

Zillow forecasts home values will continue improving, but the high growth rate is likely unsustainable, noting they expect values to rise only another 3.3 percent in 2013, a yearly appreciation rate more in line with historic norms.

“The 5.9 percent annual appreciation rate far exceeded yearly rates of appreciation typically associated with healthy markets and represents the largest annual gain since August, 2006 – near the peak of the housing bubble,” the company reports.

Strong demand and limited inventory fueled improvement

“We expected 2012 to be a good year for housing, and it delivered in spades. Strong demand paired with limited inventory in many markets helped fuel a robust and often rapid recovery in overall home values, good news for homeowners after years of poor performance. We expect this recovery to continue into 2013, but at a more sustainable pace,” said Zillow Chief Economist Dr. Stan Humphries.

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“It’s important to be cautious moving forward,” Dr. Humphries added, “even as we celebrate the undeniably positive end to 2012, and be careful that consumers don’t grow to expect such high appreciation as the norm. Buying a home should be a long-term decision, and these swings between a deep housing recession and higher-than-normal appreciation rates can give consumers whiplash and cause some to lose sight of that.”

Regional performance varied

Of the 30 largest metros covered by this report, only Cincinnati and Chicago failed to show annual and quarterly increases in the fourth quarter, and 69 percent of the metros registered annual home value gains in 2012.

The housing market recovery continues to be “uneven,” reports Zillow, as annual home value growth rates varied widely across studied metros, ranging from a 0.2 depreciation in Chicago to a 22.5 percent appreciation in Phoenix over the year.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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