CoreLogic has released the CoreLogic Home Price Index (HPI) and HPI Forecast for September 2021, showing that demand for homebuying remained strong through the end of the summer. However, the ongoing housing supply shortage has continued to drive up prices, which increased 18% year over year in September, to record highs creating additional challenges for entry into the homebuying market. High demand and low supply levels for entry-level homes, in particular, are sidelining many would-be first-time buyers.
We may see this challenge intensify as millennials continue to make up a large part of homebuying demand and flock to tech hubs like Seattle; San Jose, Calif; and Austin, Texas. This is reflected in a recent CoreLogic consumer survey, with 47.9% of this cohort stating they cannot afford to purchase a home in their preferred area.
“The pandemic led prospective buyers to seek detached homes in communities with lower population density, such as suburbs and exurbs,” says Frank Martell, president and CEO of CoreLogic. “As we head into 2022, we expect some moderation in the current pattern of flight away from urban cores as the pandemic wanes.”
Nationally, home prices increased 18% in September 2021, compared to September 2020. On a month-over-month basis, home prices increased by 1.1% compared to August 2021. In September, appreciation of detached properties (19.6%) was 7.4 percentage points higher than that of attached properties (12.2%). Home price gains are projected to slow to a 1.9% increase by September 2022, as ongoing affordability challenges deter some potential buyers.
In September, home prices continued to rise sharply in Twin Falls, Idaho, which logged the highest year-over-year increase at 36.3%. For the first time since May 2021, Michigan City, Ind., outpaced Bend, Ore., to claim the second-highest ranking for home price gains at 35.5% year over year.
At the state level, the Mountain West continued to dominate the top spots, with Idaho and Arizona again leading the way with the strongest price growth at 30.1% and 29.6%, respectively, and Utah ranking third at 26.2%.
“Remote work has allowed many employees to buy homes further away from their office,” states Dr. Frank Nothaft, chief economist at CoreLogic. “These homes are often in the suburbs or exurbs, where property prices and population density are lower and single-family detached housing more common.”