A strong and widespread recovery of rents has pushed prices beyond where they would have been had the coronavirus pandemic never occurred, according to Zillow’s latest market report. The report shows Phoenix leads the nation in annual rent growth at 23.1%, and is No. 2 in home value growth with 29.8%, behind only Austin, Texas.

Although U.S. home appreciation again broke records in July, there are signs of a rebalancing in the for-sale market to come, with inventory rising for the third consecutive month and home value appreciation slowing in nearly half the major markets.

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Rent growth continued to build on momentum that began in March, following a period of sluggishness that started with the COVID-19 outbreak in 2020. Nationally, typical monthly rents rose to $1,843 in July, surpassing June’s record appreciation and rising 9.2%, or $156, above July 2020.

“With the economy continuing to reopen, employees receiving more long-term guidance on remote work, and as students find their way back to college campuses, the rental market is picking back up,” said Nicole Bachaud, Zillow economic data analyst. “As high demand puts pressure on rents and incomes are unable to keep up, affordability will become more of a challenge in the coming months.”

Key July housing stats for Metro Phoenix

• Inventory is up 1.6% from June, but still down 18.8% compared to last July

• Typical home values are $390,733, up 3.4% month over month and up 29.8% year over year

• Typical rents are $1,746, up 23.1% year over year

• The share of listings with a price cut was 10% in July, up 2.1% from June

Zillow estimates rents are now $52 higher than they would have been if the past 18 months had been more normal. Rents first surpassed their pre-pandemic trajectory last month.

Rents in nine major metropolitan areas, all across the Sun Belt, are at least 10% higher than would have been expected based on pre-pandemic trends, topping out at 15.6% higher in Tampa. Rents in just nine metros are lower than projected, and nearly all are expensive coastal markets: Los Angeles; Washington, D.C.; Chicago; Minneapolis; Seattle; Boston; New York; San Francisco; and San Jose.

The top 14 metros for annual rent growth are scattered across the Sun Belt, led by Phoenix, up 23.1%, Las Vegas (22.7%), Tampa (21.4%) and Riverside (19.9%). July rents are also positive year over year in all major metros, with holdouts New York, San Francisco and San Jose finally posting yearly growth.

Available for-sale inventory took another encouraging step forward in July, rising 4.5% over June to mark the third consecutive month of rising supply. The improvement is widespread; inventory rose month over month in all but three of the 50 largest U.S. metros. Some of the largest additions of supply came to in-demand metros — Cleveland, Buffalo, Columbus, Denver and Austin. While housing supply is still nearly 28% below July 2020 levels, further injections will help reduce competition and slow extreme price growth.

Home value growth again broke monthly and annual records, with year-over-year appreciation of 16.7% and monthly gains of 2%. This brings typical home values measured by Zillow’s Home Value Index (ZHVI) to $298,933, up nearly $43,000 over last July. Austin again tops the charts with year-over-year growth landing at 41.5%, significantly higher than New Orleans’ 11.6% year-over-year growth at the bottom of the pack.

The end of rampant price hikes may be on the horizon, however, as 22 of the nation’s 50 largest metros had slower monthly growth than in June. The share of listings with a price cut rose 1.7% in July to 10.4%, and median time on market rose or stayed steady in all but three major metros.

“All signs point to the likelihood that the housing market is beginning to ease off the gas pedal,” said Bachaud.