Home prices grew in July by the fastest rate in nearly two years, a 5.5 percent annual gain. According to CoreLogic's Home Price Index (HPI), the month-over-month change was 1.2 percent. The company said it was "The one-two punch of strong purchase demand - bolstered by falling mortgage rates, which dipped below 3 percent for the first time ever in July - and further constriction of for-sale inventory" that has driven upward pressure on home price appreciation.
"On an aggregated level, the housing economy remains rock solid despite the shock and awe of the pandemic. A long period of record-low mortgage rates has opened the flood gates for a refinancing boom that is likely to last for several years," said Frank Martell, president and CEO of CoreLogic. "In addition, after a momentary COVID-19-induced blip, purchase demand has picked up, driven by low rates and enthusiastic millennial and investor buyers. Spurred on by strong demand and record-low mortgage rates, we expect to see more home building in 2021 and beyond, which should help support a healthy housing market for years to come."
There is, as always, different rates of increase by locality. CoreLogic notes that homebuying activity is rising in "traditionally affordable suburban and rural areas that allow for more space as schools and work remain online." It points to two Long Island counties where home prices were up 4.3 percent on an annual basis in July. Nassau and Suffolk have become destinations for residents moving from metro New York-Jersey City-White Plains where prices, in contrast, rose only 0.4 percent.
The company, however, does not expect July's renewed acceleration to continue. Its national HPI Forecast shows annual home price growth slowing through July 2021, reflecting the anticipated elevated unemployment rates during the next year. Job losses could lead to an increase of distressed-sale inventory as well. Financial pressures will cause some homeowners to default on their mortgage payments, especially as forbearance periods end.
The HPI Forecast also expects localized disparity in price increases. Markets that depend on tourism are forecast to see substantial price declines, 7.8 percent by next July in the case of Las Vegas for example. San Diego, where inventory is tight, could see a 5.8 percent gain over the next year.
The CoreLogic Market Risk Indicator (MRI), which looks at the overall health of various housing markets, predicts that metro areas with an elevated resurgence of COVID-19 cases - like Prescott, Arizona and Miami - are at the greatest risk (above 70%) 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, Huntington, West Virgini; and Las Vegas.