‘In High Gear:’ Annual U.S. Home Price Appreciation Reaches Double Digits
(Chart courtesy of CoreLogic.)
Add the CoreLogic Home Price Index to the growing Double-Digit Price Growth Club.
The company’s monthly index showed nationally, home prices increased by 10 percent annually in January. On a month-over-month basis, home prices increased by 0.9% from December. The report said January gains across all of the index’s 10 select metropolitan areas surpassed their January 2020 levels.
CoreLogic Chief Economist Frank Nothaft called 2020 a “landmark year” for the housing market, citing record-low mortgage rates that encouraged first-time homebuyers to dip their toe into the housing market and allowed home price growth to remain strong, despite economic uncertainty. He said the momentum appears to be continuing into 2021, with home price growth experiencing its first double-digit annual appreciation since November 2013 in January.
However, as we look forward to the rest of 2021, we may expect to see challenges for some prospective homeowners,” Nothaft said. “Despite first-time buyers driving high demand, entry-level homes remain in short supply. Homes priced below 75% of the local median price had 14% annual appreciation, negating most of the benefits of record-low mortgage rates. When interest rates rise, the affordability squeeze for first-time buyers will become even more of a challenge.”
A February CoreLogic survey found nearly 76% of U.S. non-homeowners, aged 18 or older, say that they have no plans to purchase a home within the next six months. When asked what was the biggest deterrent, 43% of respondents cited affordability constraints — specifically, not having enough money for a down payment or mortgage — which could be an additional factor keeping them from purchasing.
“Record-low mortgage rates were a significant driving force behind last year’s rebound in housing market activity,” said Frank Martell, president and CEO of CoreLogic. “However, heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers. While new construction may help balance home prices towards the end of 2021, we may expect to see demand slow in the medium-term.”
The report said metro areas where affordability constraints are prevalent continue to persist as prices rise. Home prices in San Diego increased by 11% year over year and are forecasted to increase an additional 9.6% over the next 12 months.
At the state level, CoreLogic reported Idaho and Montana had the strongest price growth in January, up 21% and 17.4%, respectively, while Maine and Indiana tied for third place at 15.3% growth each.