Home value growth across the country is increasing at the slowest pace in 15 months, according to the January Zillow Real Estate Market Report. Over the past year, home values rose 6.7 percent to a median home value of $207,600.

In May 2017, national home values were rising at their fastest pace since the housing bubble, up 7.6 percent year-over-year, but have since slowed, dropping about a tenth of a percentage point each month since last summer.

"The pace of home value appreciation we experienced during much of last year was not sustainable, and a slow glide path down to a more normal appreciation rate has been expected for some time," said Zillow Senior Economist Aaron Terrazas. "This slowdown is nothing to be overly concerned with -- demand from home buyers remains very high, and inventory remains tight. New home construction is growing, providing some relief to buyers who can afford the generally high price point of new homes. It's important to note that home values are still growing very quickly relative to historic norms. After years of intense competition, some buyers may be more willing than previously to take more time with the process and to wait until the right home at the right price comes on the market, even if it's not for several months. Removing a lot of this frenzy, especially as inventory remains incredibly tight, may prove to be good news for beleaguered buyers."

Markets with the greatest home value appreciation are in the West -- San Jose, California, Las Vegas and Seattle reported the greatest home value growth over the past year. In San Jose, home values rose about 23 percent – about three times faster than its historic pace – to a median home value of $1,202,900.

Tight inventory will put a strain on buyers this home shopping season, even more so than last year. There are almost 10 percent fewer homes on the market than a year ago, with San Jose, Las Vegas and Indianapolis reporting the greatest drop in inventory. New home starts have increased about 7 percent over the past year, a positive trend but still insufficient to meet demand.

Median rent across the nation rose 2.6 percent since last January, to a median payment of $1,441 per month. Sacramento, California, Riverside, California and Seattle reported the highest year-over-year rent appreciation among the 35 largest U.S. housing markets. Median rent in Sacramento rose just over 8 percent to a Zillow Rent Index^iv (ZRI) of $1,845. Rent in Riverside rose 6 percent year-over-year, and rent in Seattle rose 5 percent.

Mortgage rates^v on Zillow gradually increased throughout the month of January, starting at 3.77 percent and ending at 4.04 percent, the month high. Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.