Home prices rose by 6.7% year-over-year during September, the greatest annual increase since May 2014, according to the latest Home Price Index (HPI) data released by CoreLogic. On a month-over-month basis, home prices inched up by 1.1% between August and September.
CoreLogic attributed the aggressive upward motion in home prices from one year earlier to record-low mortgage rates that lured first-time homebuyers into the market while encouraging existing homeowners to either trade-up or invest in a second residential property. At the same time, historically low inventory levels and a minimal level of new construction created a sellers’ market that fueled home price appreciation on the limited supply of homes for sale.
Among the states, Idaho led the nation with the highest year-over-year home price growth at 11.9%, followed by Arizona and Maine at 11%, Utah at 9.7%, and New Hampshire, and Missouri tied at 9.4%. Among the nation’s largest metro areas, Phoenix recorded an 11.1% year-over-year price appreciation, considerably ahead of second-ranked San Diego at 7.1%.
Looking forward, CoreLogic’s HPI Forecast is predicting a relatively scant price increase of 0.2% by September 2021 as the evaporation of affordability opportunities and increased for-sale inventory will slow price appreciation. However, CoreLogic added that home price performance might be more vibrant if a post-pandemic recovery is more robust than anticipated.
“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,” said Dr. Frank Nothaft, Chief Economist at CoreLogic. “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.”
Furthermore, the CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicted that metros hit hard by the shrinkage of the tourism market during the pandemic, most notably Las Vegas and Miami, are at greatest risk of home price decline over the next 12 months. Other metro areas that the MRI pegged for a high risk of price declines included Lake Charles, Louisiana; Springfield, Massachusetts, and Prescott, Arizona.