Those mythical deals homebuyers were hoping to score during the peak of the pandemic shutdown never materialized. In fact, during the month of April, home prices rose 5.4 percent over the same period last year, according to CoreLogic’s latest Home Price Index (HPI).
From March to April, prices inched up 1.4 percent as sellers took their homes off the market and shelter-in-place orders limited in-person activities. Despite record-low mortgage rates, data from the National Association of Realtors suggests that existing home sales plunged 17.8 percent year-over-year in April.
Millennials, who were on track to buy more real estate than any other generational cohort in 2020, were particularly hard-hit by a 25 percent decrease in the supply of entry-level homes on the market.
“The very low inventory of homes for sale, coupled with homebuyers’ spur of record-low mortgage rates, will likely continue to support home price growth during the spring,” said Dr. Frank Nothaft, chief economist at CoreLogic.
While these figures might sound promising for sellers, CoreLogic’s HPI Forecast calls for a 1.3 percent decrease in home values by April 2021 — something that hasn’t happened since the housing market crash. Areas of the country that are reliant on tourism or the oil and gas industry are likely to experience the sharpest declines.
“If unemployment remains elevated in early 2021, then we can expect home prices to soften. Our forecast has home prices down in 12 months across 41 states,” said Nothaft.
Forty percent of the country’s 50 largest metropolitan areas were deemed overvalued by CoreLogic, including tourism hotspots like Las Vegas and Miami, where home prices are anticipated to fall 7.2 percent and 4.4 percent, respectively, by next year. Eighteen percent of the urban markets surveyed were undervalued, while 42 percent were considered at value.
In April, the HPI of single-family attached units, such as condos and duplexes, increased 4.3 percent year-over-year and 5.7 percent for single-family detached homes, indicating that low mortgage rates are enticing buyers to purchase larger, detached properties that they previously could not afford.
While the rest of the US economy grapples with an uncertain future, the housing market may be shielded from many of the pandemic’s effects.
“Tight supply and pent-up demand, particularly among millennials, provides optimism for a bounce-back in the housing market purchase activity and home prices over the medium term,” said Frank Martell, president and CEO of CoreLogic. “The next 12 to 18 months are going to be very tough times for the broader economy. As employment and economic activity begin to pick up, as it will surely do, we expect housing to be a driver in a national recovery.”