U.S. home prices increased about 1% in August compared with July and were up 5.9% compared with August 2019, according to CoreLogic.
Driving the increase was a limited supply of homes for sale, in addition to pent-up demand from families moving out of urban centers in reaction to the coronavirus pandemic.
As of the end of the month, for-sale inventory had dropped 17% year-over-year, CoreLogic says.
Also driving the increase were record low mortgage rates, which resulted in increased demand against limited supply.
“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,” says 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.”
Despite the fact that home prices have increased every month thus far since the pandemic began, CoreLogic is predicting that home price appreciation will slow over the next year, with declines in 27 states.
This will be due mainly to greater availability of new and existing homes, the firm says.
“The imbalance between home-buyer demand and for-sale inventory is particularly acute for lower-priced homes,” explains 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.”
Specifically, CoreLogic predicts home price appreciation will begin to slow in early 2021.
However, the company emphasizes that home price growth can vary widely from market to market.
For instance, in Phoenix, where there is a severe shortage of for-sale homes, prices increased 9.8% in August. Meanwhile, the New York-Jersey City-White Plains metro recorded an annual decline in home prices of -0.1%, 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%, 9.7% and 9.6%, respectively.
Looking forward, the firm’s 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% by August 2021.
Conversely, in San Francisco, home prices are forecasted to increase 7.8% over the next 12 months as low inventory continues to push prices up.