Home Prices Rise to 5.9% Rate

Fueled by low inventories, home prices rose dramatically in August 2020.

authors QR staff | October 7, 2020

Home equity, a key driver of home improvement spending, is on the rise.

According to CoreLogic, home prices nationally increased 5.9 percent in August 2020, compared with August 2019, and the gain was up nearly 1 percent compared to the prior month, when home prices increased 5.1 percent year over year.

Despite the continued pressures of the pandemic, consumer home-purchasing power has stayed strong as mortgage rates remain at record lows. Meanwhile, for-sale inventory has continued to dwindle, dropping 17 percent year-over-year in August, which created upward pressure on home price appreciation as buyers compete for the limited supply of homes.

“Consumers who have not been as financially impacted by the ongoing economic pressures are taking advantage of low mortgage rates to either break into the market, upgrade their living situations or purchase second homes and investment properties,” said Frank Martell, president and CEO of CoreLogic. “With heightened activity putting a strain on the current for-sale inventory, strong demand should help spur new homebuilding activity.”

Home price growth is expected to slow as greater availability of new and existing homes are placed for sale in 2021 and elevated unemployment saps buyer demand. The HPI Forecast shows prices will start to downshift in early 2021, with annual U.S. HPI gains slowing to just 0.2 percent by August 2021 and many locations experiencing a decline in prices.

“The imbalance between homebuyer demand and for-sale inventory is particularly acute for lower-priced homes,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Because of this imbalance, homes priced more than 25 percent below the median were up 8.6 percent in price over the last year, compared with the 5.9 percent price increase for all homes.”

Despite the rapid acceleration of national home price growth, local markets continue to vary. For instance, in Phoenix, where there is a severe shortage of for-sale homes, prices increased 9.8 percent in August. Meanwhile, the New York-Jersey City-White Plains metro recorded an annual decline in home prices of -0.1 percent, as residents opt for more space and privacy in less densely populated areas. By state, Idaho, Arizona and Maine experienced the strongest price growth in August, up 10.8 percent, 9.7 percent and 9.6 percent, respectively.

Looking forward, the HPI Forecast also reveals the disparity of home price growth across metros. In markets like Las Vegas, where the local tourism economy and job market continue to struggle, home prices are expected to decline 6.5 percent by August 2021. Conversely, in San Francisco, home prices are forecasted to increase 7.8 percent over the next 12 months as low inventory continues to push prices up.

The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that metros such as Las Vegas and Miami — areas that have been hard hit by the collapse of the tourism market — are at the greatest risk (above 70 percent) of a decline in home prices over the next 12 months. Other metro areas with a high risk of price declines include Lake Charles, Louisiana; Springfield, Massachusetts; and Modesto, California. QR

Voice your opinion!

This site requires you to login or register to post a comment.