Rents are up in Sacramento, but housing market is slowing down. Here’s why.

Homes values declined last month across the country and in many large California metro areas, continuing a pattern where housing prices fall and rents rise, according to a new report from Zillow.

The Sacramento region was no exception: Homes values fell by a modest one-tenth of a point in May although prices remained much lower than in other large regions of the state. Topping Sacramento were San Diego, San Francisco and San Jose, where the median price of a home was $1.176 million.

Nevertheless, Sacramento remains far more expensive compared to other areas of the country. The median home value in the Sacramento region was $411,800 in May, compared with the U.S. median of $226,800.

Homes values were up only slightly since last year in six California metro areas except for San Jose where values declined by nearly 6 percent.

“The general overarching narrative across the U.S. is that housing is slowing down,” said Skylar Olsen, Zillow’s director of economic research. “Coastal California markets are just extreme versions of that narrative — they were moving much faster than other metros and the slowdown is more abrupt.”

Overall, Olsen said the lag in home values may have more to do with the unaffordable down payments than it does a sudden influx of sales that reduce price pressure. That means more people are in the rental market and contributing to price growth.

Last month, the median rent in Sacramento jumped to $1,927 — close to a 5 percent increase compared with the same period last year.

Olsen said the home purchasing cool down is milder further inland compared to coastal areas. “In general, Sacramento is slowing down but not as dramatically as San Jose and San Francisco,” she said.

Buyers should not breathe easy, though. Prices have risen aggressively in the last seven years and will likely continue growing again after a minor period of “price correction,” Olsen said.

“There is still a long term solid structural good, solid demand for for-sale housing,” Olsen said. “In other words, there are still a lot of first-time home buyers who are expected to come to the market. That has a lot to do with the size of the millennial generation and the fact that the largest cohort within them are still within their late 20s.”

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