U.S. home prices continued to rise rapidly in March, propelled by low inventory and record demand from millennial buyers, CoreLogic’s home price index shows.
The firm’s data show that home prices increased 2% in March compared with February and were up 11.3% compared with March 2020.
Year-over-year, Idaho and Montana had the strongest price growth in March, up 25% and 18.8% respectively, as they continue to see an uptick in inbound migration from buyers moving away from more costly coastal areas.
Arizona had the third-strongest annual price growth with an 18% increase.
As consumer confidence rebounds and the job market picks back up, the 2021 spring home buying season is on track to outpace trends seen in 2019 and 2018, CoreLogic says.
Millennials lead the homebuying charge with older millennials seeking move-up purchases and younger millennials entering peak home buying years.
In second half of the year, further erosion of affordability may dampen purchase demand as prospective buyers continue to compete for the severely limited supply of for-sale homes.
A pick-up in construction and an increase in for-sale listings as more people get vaccinated may help moderate surging home price growth.
“Despite the severe slowdown last year, the 2021 spring home buying season is trending strong — reflecting the many positive signs of economic recovery,” says Frank Martell, president and CEO of CoreLogic, in the firm’s HPI report. “With prospective buyers continuing to be motivated by historically low mortgage rates, we anticipate sustained demand in the summer and early fall.”
Currently, CoreLogic is forecasting that home prices will increase 3.5% by March 2022, as intensifying affordability challenges narrow the pool of potential buyers and are likely to drive a slowdown in home price growth.
“Lower-priced homes are in big demand and short supply, driving up prices faster compared to their more expensive counterparts,” says Frank Nothaft, chief economist at CoreLogic. “First-time buyers seeking a starter home priced 25 percent or more below the local-area median saw prices jump 15.1 percent during the past year, compared with the overall 11.3 percent gain in our national index.”
Photo: Phil Hearing