Cooldown Coming for Home Prices?

CoreLogic released its CoreLogic Home Price Index (HPI) and Forecast for May 2020 and found home prices rose 4.8% annually in May.

When compared with just last month (April 2019), home prices experienced an uptick of 0.7% during May. Experts point to a continued and steady increase in demand, paired directly with a decrease in supply, for the positive home price growth this season.

However, analysis of the report says that housing may not have yet seen the full effects that the coronavirus crisis will bring. Specifically, experts anticipate that the full impacts of the pandemic—and resulting recession—are just now beginning to emerge and affect the industry.

According to the report, although new contract signings seem to still be on the rise year after year, home price growth is expected to come to a halt as temperatures heat up (June), and continue to remain staid throughout the rest of the summer season. Exact predictions provided by CoreLogic include an expected month-over-month price decrease of 0.1% in June, as well as a year-over-year decline of 6.6% by May 2021.

The main factor for this prediction of a downturn in home pricing, according to experts, is the increased unemployment rates currently plaguing the nation. The recent spikes in COVID-19 cases—and ensuing re-closures and tightened safety measures—also are contributing factors considered.

CoreLogic Chief Economist Dr. Frank Nothaft best explained what is happening in the housing industry, and CoreLogic’s subsequent predictions: “Pending sales and home-purchase loan applications are higher than in June of last year and reflect the buying activity of millennials. By the end of summer, buying will slacken and we expect home prices will show declines in metro areas that have been especially hard hit by the recession.”

Frank Martell, President and CEO of CoreLogic, also spoke of what to expect: “Home-purchase activity, bolstered by record-low interest rates, continues to exceed expectations despite the severe recession. Pent-up buyer demand was delayed from spring to summer and is reflected in the latest price data. But with elevated unemployment, purchase activity and home prices could fall off after summer.”