That the rapid rise in
home prices since spring is setting near decade long highs was confirmed again
this week
, this time by CoreLogic. The company says its Home Price Index (HPI)
rose 7.3 percent over the 12 months that ended in October and was the was the
fastest rate of appreciation since April 2014.
Prices were up 1.1 percent
month-over-month.

The company says that
home prices climbed in recent months due to heightened demand and ongoing home
supply constraints. This could grow worse if the pandemic worsens and potential
sellers hold off listing their homes. There is hope, however, for meeting some
of the demand. New home construction surged in October and the National
Association of Home Builders reported its index measuring home builder
confidence in the new home market set a third record high in as many months.

While prices are rising
rapidly on a nationwide basis, local markets continue to vary. Phoenix has a severe
shortage of for-sale homes and prices there posted a 2.1 percent annual increase
in October. Meanwhile, the New
York-Jersey City-White Plains metro saw prices rise only 2.1 percent as residents
continue to seek out more space in less densely populated areas. At the state level, Maine, Idaho, and Arizona
experienced the strongest price growth in October, up 14.9 percent, 13.1 percent,
and 12 percent, respectively.

“The pandemic has
shifted home buyer interest toward detached rather than attached homes,” said
Dr. Frank Nothaft, chief economist at CoreLogic. “Detached homes offer more
living space and are typically located in less densely populated
neighborhoods. And while prices of single-family detached homes posted an
annual increase of 7.9 percent in October, the price of attached homes rose
only 4.5 percent year over year.”

Looking forward,
CoreLogic expects home prices to slow dramatically. Its HPI Forecast is for annual
appreciation to drop to 1.9 percent by October of next year. The company adds,
however, that should the economic recovery from the pandemic be more robust,
then that projection for home price performance might improve.

“Home buyers have been
spurred by record-low mortgage rates and an urgency to buy or upgrade to more
space, especially as much of the American workforce continues to work from
home,” said Frank Martell, president and CEO of CoreLogic. “First-time buyers
in particular should remain a big part of next year’s home purchases
, as the
largest wave of millennials is heading into prime home-buying years.” 

The HPI Forecast also
projects a continued disparity in price growth across metros. In markets like
Las Vegas, where the local tourism economy and job market continue to struggle,
home prices are expected to decline 1.8 percent by October 2021. Conversely, in
San Diego, home prices are could grow by 7.9 percent over the next 12 months as
low inventory continues to push prices up.

By Jann Swanson , dated 2020-12-01 10:44:14

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Courtesy of Mortgage News Daily

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