‘Gaining Momentum’: October Annual U.S. Home Prices Up 7.3%
CoreLogic, Irvine, Calif., said home prices increased by 7.3% in October from a year ago, marking the fastest annual appreciation since April 2014.
The company’s monthly Home Price Index and HPI said on a month-over-month basis, home prices increased by 1.1% compared to September.
The report said home prices climbed in recent months amid heightened demand and ongoing home supply constraints. CoreLogic Chief Economist Frank Nothaft said the supply shortage could further intensify as COVID-19 cases continue to rise and would-be sellers remain hesitant about putting their homes on the market.
However, the report noted new home construction surged in October and builder confidence reached a new high for the third consecutive month. The decreased pressure on supply could moderate home price growth over the next year. This is reflected in the CoreLogic HPI Forecast, which shows home prices slowing to 1.9% by October 2021.
CoreLogic President and CEO Frank Martel said should the economic recovery from the pandemic be more robust, then projections for home price performance could 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,” Martell said. “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 report said despite rapid acceleration of national home price growth, local markets continue to vary. For instance, in Phoenix, where there is a severe shortage of for-sale homes, prices increased by 12.1% in October. Meanwhile, the New York-Jersey City-White Plains metro recorded only a small annual increase of 2.1%, 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%, 13.1% and 12%, respectively.
“The pandemic has shifted home buyer interest toward detached rather than attached homes,” Nothaft said. “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% in October, the price of attached homes rose only 4.5% year over year.”
The HPI Forecast also notes disparity in expected home price growth across metros. In markets such as Las Vegas, where the local tourism economy and job market continue to struggle, home prices are expected to decline 1.8% by October 2021. Conversely, in San Diego, home prices are projected to increase 7.9% over the next 12 months as low inventory continues to push prices up.