Home prices are still rising, but relief for buyers is coming

Home prices continue to increase as national inventory levels remain low heading into August. But relief for buyers could be coming in the next 12 months.

Home prices increased 2.3% from May to June, and 17.2% year-over-year, according to the latest CoreLogic report on home prices. However, CoreLogic officials said price gains could slow to as low as a 3.2%-gain by this time next year, as ongoing affordability challenges deter potential buyers — as well as an uptick in new for sale listings.

“Home prices have been rising in the mid single-digits for some years now, and the recent surge to double digit price jumps reflect the convergence of exceptional demand persistent low supply,” said Frank Marshall, CoreLogic CEO and president. “Affordability will become a more acute issue for the foreseeable future.”

The 17.2% growth is the largest annual growth reported since 1979, as supply and demand pressures endure and construction costs continue to rise, said Frank Nothaft, CoreLogic’s chief economist. Low- and middle-income Americans, he said, are being impacted the most.

At the residential level, the COVID-19 pandemic sparked an increase in buyer desire for lower density neighborhoods and more living space, Nothaft said. This, he said, led to detached homes having the highest annual growth (+19.1%) in June since 1976.

“Communities with single-family detached houses fill the need [for more space],” Nothaft said.

May home prices also jumped 16.6% annually in the latest S&P CoreLogic Case-Shiller National Home Price Index report. Home prices in May stood at all-time highs in 18 of the 20 S&P cities surveyed, and five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – recorded their all-time highest 12-month gains. 

Phoenix’s 25.9% increase led all cities for the 24th consecutive month in accelerating home prices, with San Diego (+24.7%) and Seattle (+23.4%) close behind. Prices were strongest in the West (+19.9%) and Southwest (+19.8%), but every region logged double-digit gains from April to May.

Continuing to look regionally, home prices in the western United States are still accelerating. Twin Falls, Idaho, where Evel Knievel famously attempted to jump a canyon in 1974 in a steam-powered rocket, experienced the highest year-over-year increase in the country, at 40.2%. Bend, Oregon, with beautiful scenery, a bevy of craft breweries and microscopic home inventory, saw the second-highest home price increase in the country year-over-year, at 35.4%. States with the highest annual home price growth in June were Idaho (34.2%), Arizona (26.1%), and Montana (24.3%).

“Home buyers are continuing to seek out more affordable locations with lower population density and attractive outdoor activities,” Nothaft said.

The markets expected to see the largest increases in home prices in the next 12 months, per CoreLogic, are San Diego, California (+11.5% expected increase); Miami-Miami Beach, Florida (+4.6% expected increase); and Las Vegas, Chicago, and Los Angeles (+4.3% expected increase for all three).

The markets at risk for the biggest home price declines over the next 12 months are Springfield and Worcester, Massachusetts; Chico and Oxnard-Thousand Oaks-Ventura, California; and Norwich-New London, Connecticut, Corelogic’s study found.

The overall pending home sales index fell 1.9% to 112.8 in June, according to the National Association of Realtors, which tracks the metric. (An index of 100 is equal to the average level of contract activity during 2001, the first year examined. The volume of existing-home sales in 2001 was within the range of 5 to 5.5 million.)

Regionally, pending home sales in the Northeast increased 0.5% to 98.5 on the index in June, an 8.7% rise from a year ago. In the Midwest, the index grew 0.6% to 108.3 last month, down 2.4% from June 2020. Pending home sales in the South fell 3.0% to an index of 132.4 in June, down 4.7% from June 2020. The index in the West decreased 3.8% in June to 98.1, down 2.6% from a year prior. May’s 8% increase was the highest jump for that month since 2005, according to NAR.

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