Home prices rose in the fastest pace in two years in July amid exceptionally strong demand, dwindling supply and record low mortgage rates.
Home prices in July were 5.5% higher than in 2019, up from the 4.3% annual gain seen in June, according to CoreLogic.
The CoreLogic Home Price Index (HPI™) and HPI Forecast™ shows annual home price growth slowing through July 2021, reflecting the anticipated elevated unemployment rates during the next year. This could lead to an increase of distressed-sale inventory as continued financial pressures leave some homeowners unable to make mortgage payments, especially as forbearance periods come to a close.
“Lower-priced homes are sought after and have had faster annual price growth than luxury homes,” said Dr. Frank Nothaft, chief economist at CoreLogic. “First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is in particularly short supply,” he said.
“The housing economy remains rock solid despite the shock and awe of the pandemic. A long period of record-low mortgage rates has opened the flood gates for a refinancing boom that is likely to last for several years," said Frank Martell, president and CEO of CoreLogic.
"In addition, after a momentary COVID-19-induced blip, purchase demand has picked up, driven by low rates and enthusiastic millennial and investor buyers. Spurred on by strong demand and record-low mortgage rates, we expect to see more home building in 2021 and beyond, which should help support a healthy housing market for years to come.”
The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that metro areas with an elevated resurgence of COVID-19 cases — like Prescott, Arizona and Miami, Florida — are at the greatest risk (above 70%) of a decline in home prices over the next 12 months. Other metro areas with a high risk of price declines include Lake Charles, Louisiana; Huntington, West Virginia and Las Vegas.
Last week, other respected data showed that U.S. home prices rose at a slightly slower pace in June, but the U.S. housing market continued to show resilience in the face of the coronvavirus pandemic.
The S&P CoreLogic Case-Shiller 20-city home price index rose 3.5% in June from a year earlier, down from May’s 3.6% increase and slightly below economists’ expectations.
Phoenix led the way with a 9% increase followed by Seattle (up 6.5%) and Tampa (up 5.9%). But prices rose at all 19 cities measured in June. The 20-city index released Tuesday excluded prices from the Detroit metropolitan area index because of delays related to pandemic at the recording office in Wayne County, which includes Detroit.
“The June Case-Shiller numbers show the housing market continues to withstand the pandemic-driven blows that have caused so many other facets of the economy to suffer,” economist Matthew Speakman at the real estate firm Zillow told the Associated Press.
The continuing spread of COVID-19 cases and Congress’ failure to approve more financial aid to the economy “could jeopardize the path of the economic recovery,″ Speakman wrote in a research report. But those “concerns haven’t materialized in home prices to this point.″
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