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Home Price Growth Continues to Accelerate Amidst Pandemic

Home price growth accelerated in April, powered by a rebound in home sales and a low housing inventory.

The CoreLogic Home Price Index (HPI) showed a 5.4% year-over-year and a 1.4% month-over-month increases in national home prices. However, CoreLogic expects a slowdown in May, with a month-over-month gain of 0.3% and an annual decline of 1.3% from April 2020 to April 2021.

Despite increased home sales, data showed that monthly home-purchase activity in April was slower than in April a year ago due to stay-at-home orders that put the spring homebuying season on hold. The already low for-sale inventory of entry-level homes also nosedived to 25% in April. CoreLogic warned that this trend, should it continue, would harm home sales in the near term.

“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,” CoreLogic Chief Economist Frank Nothaft said. “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.”

The CoreLogic Market Condition Indicators, an analysis of housing values in the top 50 metros based on housing stock, showed inequality in home prices across markets. Around 42% of metro areas were at value in April, while 40% had an overvalued housing market, and 18% were undervalued.

CoreLogic predicted that overvalued homes in coronavirus-hit markets like Las Vegas and Miami would see prices decline by 7.2% and 4.4%. Meanwhile, single-family attached units (condos, duplexes) were expected to increase by 4.3% year over year in April, whereas the single-family detached units would increase by 5.7% year over year.

“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.”

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