The pace of home price appreciation continued to slow in July – however, it is forecast to pick up some steam over the next 12 months due to low inventory and increasing demand.
U.S. home prices increased 0.5% on an adjusted basis in July compared with June and were up 3.6% compared with July 2018, CoreLogic’s home price index shows.
Currently, the housing data and analytics firm is forecasting that home prices will increase by 5.4% during the 12 months ended July 2020.
For the month of August, the firm is forecasting the home prices will increase 0.4% compared with July.
“Sales of new and existing homes this July were up from a year ago, supported by low mortgage rates and rising family income,” says Frank Nothaft, chief economist at CoreLogic. “With the for-sale inventory remaining low in many markets, the pick-up in buying has nudged price growth up. If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year.”
Based on a recent survey conducted by one of its research partners, CoreLogic is predicting that millennials will drive a significant share of the demand for housing over the next 12 months.
The survey found that approximately 26% of this age cohort expressed an interest in buying a home in the next 12 months, but only 8% indicated a desire to sell their home within the same time frame.
This means that new housing starts, or sellers from other age cohorts, will need to make up the necessary available housing stock to meet the demand.
This desire to buy while housing stock is limited will continue to force prices up as buyers search for a home to purchase.
“Although the rise in home prices has slowed over the past several months, we see a re-acceleration over the next year to just over five percent on an annualized basis,” says Frank Martell, president and CEO of CoreLogic. “Lower rates are certainly making it more affordable to buy homes and millennial buyers are entering the market with increasing force.
“These positive demand drivers, which are occurring against a backdrop of persistent shortages in housing stock, are the major drivers for higher home prices, which will likely continue to rise for the foreseeable future.”