Runaway monthly increases in home values and rents tempered in August, according to the latest Zillow® market report, paving the way for a strong but more manageable housing market come fall. Another month of rising inventory and more for-sale listings taking price cuts are giving buyers more options and potentially less stress as they shop for their next home, but Phoenix home values are still rising at unprecedented levels.

Home value appreciation had been accelerating on a monthly basis since January but finally eased off the throttle, moderating from 1.97% month-over-month growth in July down to 1.75% growth in August. While this will be good news for buyers looking for any signs of relief, it still represents the third-largest monthly growth in Zillow records.

“The strong recovery of inventory and initial lift off the gas pedal for home value appreciation is indicative of balance returning to the market,” said Nicole Bachaud, economic data analyst at Zillow.  “But, the major demand drivers that have pushed the market to extremes this year are still present — we’re moving from a white-hot midsummer to somewhere closer to red hot as we head into the fall.”

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In the Phoenix metropolitan region: 

• Typical home values are $401,673, up 2.5% from July and 31.8% over the past year

• Available inventory rose 3.6% since July and stands 12% below August 2020

• The share of listings with a price cut is 12.2%, compared to 10% in July

• Typical rents are $1,806, up 24.8% since last year

The deceleration of home value growth is widespread, with 43 of the 50 largest major metros seeing appreciation slow down in August, compared to 20 in July. The largest drop-offs were in Buffalo, San Diego, San Francisco and Austin.

Still, home values are up a record-breaking 17.7% ($45,557) from a year ago, bringing the typical U.S. home value to $303,288. Top metros for annual growth are Austin (44.8%), Phoenix (31.8%), Salt Lake City (27.9%) and San Diego (26.9%).

Available housing inventory continued to rise for the fourth straight month, growing 4.1% over July and cutting the annual deficit to 22.7%, up from a low of -33% year over year low in April. For-sale listings rose the most month over month in the Midwest. Meanwhile, Austin and Washington, D.C., now have more available inventory than they did one year ago.

The share of listings with a price cut rose for the fourth consecutive month, further evidence of a market returning to balance. The share of listings with a price cut grew 1.9 percentage points in August, with a total of 12.3% of listings in the U.S. seeing a price reduction before an offer is accepted. In August 2019, the total share was 17.4%.

“Another month of rising for-sale inventory gives shoppers more options to choose from and less competition, which should help reduce bidding wars and further moderate rampant price hikes,” Bachaud said. “A slightly less frenzied market means buyers have a much better chance to land the home they’re bidding on, and may even see a price drop on their saved listings, but keep in mind the market is still much hotter than normal for this time of year.”

Home sales have been rising monthly since March and continued to grow, with monthly sales ticking up slightly over July to stand 3.9% above last August. Looking forward, strong recent sales activity means Zillow economists are now expecting 5.93 million sales in 2021, a 5.1% increase over a historically strong 2020.

In the rental market, monthly rent growth had been accelerating since January, but finally took a step back in August, decelerating to 1.7% growth in August from July’s record-high 2%. Despite this, August’s 11.5% annual appreciation is the largest in Zillow records going back to 2015. Typical U.S. rents measured by the Zillow Observed Rent Index (ZORI) are $1,874, nearly $200 higher than this time last year.

Rents are up the most from last year across the Sun Belt, especially in Las Vegas (24.9%), Phoenix (24.8%), Tampa (24.7%) and Riverside (20.6%). Rents fell month over month in Kansas City and Richmond, and stayed flat in Cincinnati.