U.S. home prices increased 0.8 percent month-over-month in July – which was much lower (relatively speaking) than June’s 1.2 percent month-over-month home price increase, but equal to the average monthly home price gain over the last year.

While U.S. home prices aren’t rising as fast as they were in Spring 2013, when home prices looked like they’d been “hit with a booster rocket,” still 97 of the country’s 100 largest metros have posted year-over-year price gains, and 94 metros have experienced quarter-over-quarter gains.

July 2014 U.S. home price changes chart using Trulia Price Monitor data

Importance of Job Growth Rises as “Rebound Effect” Wanes

For the first time in two years, none of the 100 largest U.S. metros saw a year-over-year price increase higher than 15 percent. This deceleration of home prices is largely due to the waning of the post-housing-market bust “rebound effect,” where buyers and institutional investors snapped up bargains, causing home values to get some much-needed appreciation. As these bargains have disappeared from local housing markets, the rebound effect has slowed – or even reversed!

It is now up to job growth, not the rebound effect, to drive home prices upward. Increasing the number of jobs in any given market, and therefore the aggregate income of the consumers living in that market, is a far more sustainable way to improve real estate prices there. As you can see below, markets with faster job growth tend to have higher gains in home asking prices.

Chart that shows how cities with high job growth in 2014 have also experienced rising asking prices

Rents Also Boosted by Job Growth in Large Markets

U.S. rental prices increased 6.1 percent year-over-year in July, and jumped more than 10 percent in five metros. As with housing prices, rents are currently rising faster in markets with strong job growth.

Unlike U.S. home prices, rental prices have not experienced a “rebound effect” in the metros that were hit hard during the 2007-2008 housing market collapse, and these areas have not necessarily experienced bigger rent increases recently. Rents are also unlike home prices in that they are currently rising faster in high-density metros, like San Francisco and Miami, than in less-dense metros, like Houston and Minneapolis.

Here are the changes in rental prices since July 2014 and in jobs since December 2013 for the 10 largest U.S. rental markets:

Year over year change in rents in large U.S. metros - data from July 2014 Trulia Rent Monitor

Takeaway for Real Estate Professionals

If your market was hit hard when the housing bubble burst, but has since experienced strong home price gains, don’t expect local home prices to continue to rise rapidly unless your market also has strong job growth. The U.S. housing market is normalizing as the post-bubble “rebound effect” subsides.

Also, rents are rising faster than home prices in the country’s largest rental markets. This makes it increasingly attractive for consumers to buy real estate in those markets. If you operate in San Diego, Seattle, Atlanta or another major rental market, tailor your marketing materials to address the rising costs of renting and the benefits of being a homeowner over being a renter.

This is a summary of a Trulia Trends blog post. Click here to read “Home Price Gains Now Driven More By Jobs Than By Rebound Effect.”

This article contains data from the Trulia Price Monitor and Trulia Rent Monitor. They are the earliest leading indicators of how asking prices and rents are trending nationally and locally.