Did the housing happy talk just get
a little less so?
CoreLogic’s Housing Price Index
Forecast (HPI) over the May 2020 to May 2021 window is seeing more rapid price
deceleration in the face of the COVID-19 situation than did their previous 12-month
forecast that ended in April of next year.
In its report last month CoreLogic said
it expected that “the housing market may be equipped
to lead the broader economy through the recovery” but that home prices
increases would slow and that the gain from April to May would be only 0.3
percent. They went on to predict that 2021 would bring the first decline in
nine years, and by April 2021 the national price gain would turn negative, down
Today the company says
that pent-up demand and tightening supply continued to prop up home prices in
May even as the number of coronavirus cases and levels of unemployment soared. However,
the downturn is expected to be reflected in the June data and will continue
throughout the summer as unemployment persists and dampens buying. CoreLogic
now anticipates that home prices fell 0.1 percent in June and forecasts the decline
to reach 6.6 percent by May 2021.
Unlike the Great
Recession, the current economic downturn is not driven by the housing market,
which continues to post gains in many parts of the country. While activity up
until now suggests the housing market will eventually bounce back, the
forecasted decline in home prices will largely be due to elevated unemployment
rates. Those rates are expected to remain in the double digits throughout the
end of the year and may be exacerbated by the recent spike in COVID-19
However, that decline
isn’t here quite yet. There was a 4.8 percent increase in the HPI on a
year-over-year basis in May and the monthly increase was even better than
expected at 0.7 percent.
activity, bolstered by record-low interest rates, continues to exceed
expectations despite the severe recession,” said Frank Martell, president,
and CEO of CoreLogic. “Pent-up buyer demand was delayed from spring to
summer and is reflected in the latest price data. But with elevated
unemployment, purchase activity and home prices could fall off after summer.”
The price decline is
expected to be widespread. CoreLogic’s Market Risk Indicator predicts 125 metro
areas have at least a 75 percent probability of price decline by May 2021 and
prices are expected to retreat in every state. In overvalued markets like Las Vegas, where the local tourism
economy took a hit due to COVID-19, home prices are expected to drop by 20.1
percent by May 2021. Meanwhile, in San Diego-where the market conditions are
considered normal- the downturn is expected to be only around 1.3 percent over
the next 12 months.
While harder-hit areas may also experience a slower comeback
after the crisis is over, factors like low mortgage interest rates and a
shortage of for-sale supply have already supported prices in some metros and
may also encourage home price stabilization nationwide.