Driven by strong demand and lack of inventory, U.S. Home prices increased 1.1% in September compared with August and were up 6.7% compared with September 2019, according to CoreLogic.
However, the software, data and analytics company continues to predict that home price appreciation will begin to decelerate in early 2021.
However, that prediction seems to be contingent on how long the pandemic lasts.
“Housing continues to be a bright spot during an otherwise challenging economic time for many U.S. households,” says 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.”
Frank Nothaft, chief economist at CoreLogic, points out that the COVID-19 crisis “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.”
“Once the pandemic passes or a vaccine is widely administered, we should see a noticeable pick-up in for-sale homes,” Nothaft says. “And if the economy’s recovery is sluggish next year, distressed sales may also add to market inventory.”
Home-purchase demand maintained pace in the late summer compared to previous years, as record-low mortgage rates continued to motivate prospective homebuyers, including first-time buyers and homeowners looking to trade-up or invest in a second home.
However, according to the National Association of Realtors and U.S. Census Bureau, the national supply of homes for sale fell to the lowest recorded level in September.
The number of home available for sale was only 40% of what was available in September 2008 and 75% of what was available in September 2000.
This severe inventory shortage has intensified upward pressure on home price appreciation as consumers compete for the limited number of homes on the market.
CoreLogic notes that metros that are reliant on tourism – such as Las Vegas and Miami – have been hardest hit by the pandemic, economically, and thus are at the greatest risk of a decline in home prices over the next 12 months.