HOUSTON – (By Dale King, Realty News Report) – Severe inventory shortages combined with sustained buyer demand drove U.S. metropolitan home prices to record highs in May, according to the CoreLogic Home Price Index and HPI Forecast for May 2021.
“Home price gains nationwide, including distressed sales, increased year-over-year by 15.4% by May 2021 compared with May 2020 – the highest since 2005,” the report states. “No states posted an annual decline in home prices.”
However, the CoreLogic report and its monthly market-risk update highlight some potential near-term instability. One projection could affect Houston over the next year, suggesting a modest downward adjustment in local home prices.
Houston May See a Small Home Price Decline—About 0.6% Over the Next Year
CoreLogic notes that “in markets like Houston, which was hit hard by the collapse of the oil industry and recent hurricane seasons, home prices are expected to decline by 0.6% by May 2022.”
The Houston Association of Realtors reported that the average price of a single-family home sold in May was $387,105, a 30% increase from May 2020.
Nationally, the average price increase from May 2020 to May 2021 was just over 15%, but some metro areas exceeded that average. For example, San Diego experienced an 18.8% year-over-year rise in home prices for the year ending May 2021 and is forecast to grow another 10.9% over the following 12 months.
Houston’s outlook is less extreme than projections for several other metros. CoreLogic’s Market Risk Indicator warns that areas such as Springfield and Worcester, Massachusetts, and Chico, California, face the highest risk—roughly 25–30%—of home-price declines in the next 12 months.
Other metros, including Oxnard-Thousand Oaks-Ventura, California, and Norwich-New London, Connecticut, are flagged as lower risk (under 25%) for price declines over the same period.
“As we look to the balance of 2021, we expect price rises to continue, which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year,” said Frank Martell, president and CEO of CoreLogic, a global provider of property information, analytics and data-enabled solutions.
Rising prices and constrained building supply are contributing to a market that shows signs of strain. While many millennials and Gen Z buyers remain active in the hot market thanks to low mortgage rates, higher prices are deterring an increasing number of prospective buyers—particularly first-time and lower-income households.
Another CoreLogic survey found that 82% of consumers view housing affordability as a major problem, and 33% said they would delay a purchase or opt not to buy at all rather than make significant sacrifices.
“First-time buyers are hitting a wall in many places around the country as the pace of home price rises outpaces the benefits of lower borrowing costs,” Martell added.
Key takeaways from the May CoreLogic report include:
- Detached single-family homes appreciated 17.2% year-over-year—nearly double the 9.1% rise for attached properties—as buyers continued seeking more space.
- Home prices are projected to increase 3.4% by May 2022, as affordability challenges discourage some buyers and slow price growth.
- Price growth in the West was especially strong in May: Twin Falls, Idaho recorded the highest year-over-year increase at 35%, followed by Coeur d’Alene, Idaho at 32%.
- At the state level, Idaho and Arizona showed the strongest gains at 30.3% and 23.4% year-over-year, respectively. Utah also saw a notable 20.4% increase as buyers sought more affordable locations with lower density and appealing outdoor amenities.
Dr. Frank Nothaft, chief economist at CoreLogic, said current mortgage originations “are absent high-risk features, and mortgage underwriting is prudent. However, demand and supply imbalances—fueled by mortgage rates falling to less than half of what they were in 2005 and a scarcity of homes for sale—have driven the recent run-up in sales prices.”
July 12, 2021 Realty News Report Copyright 2021
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Photo: By Ralph Bivins. Realty News Report. Copyright 2021
File: Home Prices Soar. CoreLogic