Home prices across the nation increased 6.7% in September 2020 compared to the previous year, according to the CoreLogic Home Price Index (HPI™). This rate marks the fastest annual acceleration since May 2014. On a month-over-month basis, home prices increased by 1.1% compared to August 2020.
Driven by record-low mortgage rates, demand for homes remained stable in late summer compared to previous years. But demand outstripped supply as the national supply of homes for sale fell to the lowest recorded level in 20 years, just 40% of the volume in September 2008 and 75% of that seen in September 2000, according to the National Association of Realtors and U.S. Census Bureau.
“Housing continues to be a bright spot during an otherwise challenging economic time for many U.S. households,” said Frank Martell, president and CEO of CoreLogic. “Those in sectors that weathered the transition to remote work successfully are now able to take advantage of low mortgage rates to purchase a home for the first time or to trade-up to a larger home.”
Dr. Frank Nothaft, chief economist at CoreLogic, expects supply to increase next year. “COVID has contributed to the acute shortage of inventory as the pace of new construction slowed and older prospective sellers postponed listing their homes until after the pandemic,” he said. “Once the pandemic passes or a vaccine is widely administered, we should see a noticeable pick-up in for-sale homes. And if the economy’s recovery is sluggish next year, distressed sales may also add to market inventory.”
Looking forward, the HPI Forecast™ predicts that national home price increases will slow substantially to just 0.2% over the next 12 months. CoreLogic blames the sluggish prediction on “eroding affordability and increased for-sale inventory,” which will moderate home appreciation. But, if the economy recovers strongly, the company expects home prices a larger increase.
The HPI Forecast revealed the disparity in expected home price growth across metros. Some markets, such as Las Vegas, will see declines in home prices. Sin City, which relies heavily on local tourism to support its economy and job market, is expected to experience home price declines of 5.6% by September 2021. Other metro areas with a high risk of price declines include Lake Charles, La., Springfield, Mass., and Prescott, Ariz.
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