Home prices likely to ease in 2021 but federal aid could keep price appreciation strong, expert says
US home price growth in November reached its largest annual appreciation since March 2014, according to a report released Tuesday by CoreLogic. The CoreLogic Home Price Index (HPI) jumped 8.2% year over year and rose 1.1% month over month in November.
CoreLogic Chief Economist Frank Nothaft said that the gain was driven by a surge in demand from younger homebuyers.
“The demographic tailwind has arrived as Generation X and millennials drive housing demand,” he said. “Lower-priced home values increased about one and a half times faster than higher-priced home values in November, as first-time buyers tend to seek out homes within the lower price ranges.”
In Phoenix, where there is a severe shortage of for-sale homes, prices spiked 12.6% year over year. Meanwhile, home prices in the New York-Jersey City-White Plains metro only appreciated at a smaller-than-average annual rate of 3.2%, as residents migrate to less populated areas. At a state level, Idaho (+15.7%), Maine (+15.4%), and Indiana (+13.6%) reported the strongest price growth in November.
CoreLogic’s HPI Forecast expects annual home price growth to decelerate from 7.5% during the first quarter of 2021 to just 2.5% by November. “However, possible stimulus actions could help spur home buyer demand among low- and middle-income households and support stronger home price growth,” CoreLogic said.
The report also predicted that metros such as Miami, Lake Charles, La. and Prescott, Ariz. Are at the greatest risk – above 70% – of a decline in home prices over the next 12 months. Meanwhile, Brownsville-Harlingen, Texas, and Gulfport-Biloxi-Pascagoula, Miss. are at moderate or 50%-70% risk of a decrease.
“The housing market performed remarkably well in 2020 despite the volatile economic state,” said Frank Martell, president and CEO of CoreLogic. “While we can expect to see lingering effects of COVID-19 resurgences and subsequent shutdowns in the early months of 2021, vaccine distributions and stimulus actions should revitalize economic activity and keep home purchase demand and home price growth strong.”
