CoreLogic: Millennial Demand Pushes Home Prices to Highest Annual Growth in 15 Years
CoreLogic, Irvine, Calif., reported its monthly Home Price index recorded an 11.3% annual gain in March, the highest rate since March 2006.
The report said on a month-over-month basis, home prices increased by 2% compared to February. Home prices rose sharpest in the West, with seven of the 10 metros ranked with the highest year-over-year increase. Boise, Idaho, ranked at the top with a year-over-year increase of 27.7%.
At the state level, Idaho and Montana saw the strongest price growth in March, up 25% and 18.8%, respectively, as they continue to see an uptick in inbound migration from buyers moving away from more costly coastal areas. Arizona had the third-strongest price growth with an 18% increase.
The CoreLogic Home Price Forecast projects home prices to increase 3.5% by March 2022, as intensifying affordability challenges narrow the pool of potential buyers and are likely to drive a slowdown in home price growth.
CoreLogic Chief Economist Frank Nothaft said as consumer confidence rebounds and the job market picks back up, the spring homebuying season is on track to outpace trends seen in 2019 and 2018. The report said Millennials led the homebuying charge with older millennials seeking move-up purchases and younger millennials entering peak homebuying years.
“Lower-priced homes are in big demand and short supply, driving up prices faster compared to their more expensive counterparts,” Nothaft said. “First-time buyers seeking a starter home priced 25% or more below the local-area median saw prices jump 15.1% during the past year, compared with the overall 11.3% gain in our national index.”
Northaft said looking towards the second half of the year, further erosion of affordability could dampen purchase demand as prospective buyers continue to compete for the severely limited supply of for-sale homes. He said a pick-up in construction and an increase in for-sale listings as more people get vaccinated could help moderate surging home price growth.
“Despite the severe slowdown last year, the 2021 spring homebuying season is trending strong — reflecting the many positive signs of economic recovery,” said Frank Martell, president and CEO of CoreLogic. “With prospective buyers continuing to be motivated by historically low mortgage rates, we anticipate sustained demand in the summer and early fall.”