CoreLogic Forecast: Houston Home Prices to Drop 2.6%
Frank Nothaft, chief economist of CoreLogic.
HOUSTON — (By Dale King, Realty News Report) — Residents of Houston who have worn face masks, sheltered at home, lost jobs and watched Texas crude oil prices collapse are now confronting another consequence of the COVID-19 crisis: falling home prices.
CoreLogic, the global property data and analytics firm, has released its latest Home Price Index (HPI) and HPI Forecast, which paints a challenging picture for the U.S. housing market over the next several months.
The HPI Forecast predicts that national annual home price growth will slow to just 0.5% from March 2020 to March 2021, a sharp decline from the 5.4% gain forecast in January. Month-over-month growth is expected to be only 0.6% between March and April 2020, the report says.
The outlook is tougher for Houston. CoreLogic’s analysis suggests that home prices in the Bayou City will track the slump in oil and decline.
“In overvalued markets like Houston, where the oil and gas sector is struggling, home prices are expected to decline by 2.6%,” the report states.
The HPI Forecast highlights widening differences in price performance across metros and underscores an affordability crisis that began well before COVID-19 and is likely to worsen in the coming recession.
An early sign for Houston may be the average list price of homes placed on the market in April. The Houston Association of Realtors reported that the average new-listing price in April was $320,503, down 0.6% from $322,327 in April 2019.
Even after some transactions were disrupted prior to Gov. Greg Abbott’s March 31 order that classified real estate as an essential service, Houston home sales were more than 11% ahead of year-to-date levels at the same time in 2019. Through the first half of April, buyers continued to benefit from historically low mortgage rates before the full economic impact of the pandemic set in.
“The short-term effects of the economic fallout from COVID-19 are already being felt, notably rapid declines in home buying activity,” CoreLogic reported.
Still, CoreLogic economists express cautious confidence that structural supports will help keep average home prices from collapsing entirely. They forecast a modest 0.5% rise in the national average home price by March 2021.
“Home prices for March reflect transactions negotiated primarily in the previous two months, prior to the implementation of shelter-in-place policies,” said Frank Nothaft, chief economist at CoreLogic.
“The rapid decline of purchase activity beginning in mid-March is visible in other CoreLogic data and aligns with our HPI forecast of slowing price growth in April.”
He added that first-quarter GDP data indicate the U.S. entered a recession in March. With record-high unemployment claims and broader economic strain, the housing market will face ongoing headwinds.
Before the pandemic, a strong economy and rising wages encouraged many buyers to trade up to larger single-family homes, which pushed prices for detached houses nearly 1% higher relative to smaller condos and duplexes, the report notes.
CoreLogic President and CEO Frank Martell offered a more optimistic perspective, suggesting that younger buyers could play a key role in recovery.
“Although the economic fallout from lockdowns will be significant, the underlying conditions that support a rebound in home purchases remain. Once shelter-in-place orders are lifted, we expect millennials — who continued to submit purchase applications during the crisis — to lead a return to a purchase-driven housing cycle,” Martell said.
Like Houston, other overvalued markets such as Miami are also projected to see declines: CoreLogic expects combined single-family home prices in Miami to fall about 1.9% by March 2021.
