Fastest Home Price Gains Since 2004, Inventories Dwindling
CoreLogic's estimate of the annual home price appreciation in September is not nearly as high as that published yesterday (over 14 percent) by Black Knight on Monday, but at 6.7 percent, the CoreLogic number is the fastest annual acceleration in their records since May 2014. The company puts the increase in its Home Price Index (HPI) at from August to September at 1.1 percent.
Home purchase activity remained strong in the late summer, reversing the usual seasonal slowdown. Record-low mortgages rates continue to bring out the buyers, including first timers and those looking to trade-up or buy a second home. At the same time both the National Association of Realtors® (NAR) and the U.S. Census Bureau say the national supply of homes for sale fell to the lowest recorded level in September. It was at 40 percent of that seen in September 2008 and was 75 percent the September 2000 level. This severe inventory shortage has intensified upward pressure on home price appreciation as consumers compete for the limited number of homes on the market.
"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."
"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."
There was, as usual, significant disparity in appreciation across local markets. Phoenix, which had led increases in most home price assessments for many months and has a severe shortage of homes for sale, saw home prices jump 11.1 percent in September.
Meanwhile, the New York-Jersey City-White Plains metro recorded only an 0.3 percent gain as residents opt for more space and privacy in less densely populated areas. By state, Idaho led at 11.8 percent followed by Arizona and Maine, each at 11 percent.
The company continues to expect a slowing of price gains. Its HPI Forecast sees it dropping to 0.2 percent over the next 12 months as eroding affordability and increased for-sale inventory moderates appreciation. The CoreLogic HPI Forecast carries a caveat, however. Should the economic recovery be more robust, then projections for home price performance will improve.
The Forecast also reveals differences in 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 5.6 percent over the next year. Conversely, in San Diego, home prices are forecast to increase 5.7 percent over the same period 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 Prescott, Arizona.