Due to heightened demand and ongoing supply constraints, U.S. home prices increased 1.1% in October compared with September and were up 7.3% compared with October 2019, according to CoreLogic’s Home Price Index.
However, CoreLogic is forecasting that home price appreciation will slow in the months to come, due mainly to increased home construction, which should boost inventory and alleviate supply constraints. The firm points out that new home construction surged in October and builder confidence reached a new high for the third consecutive month.
On the other hand, the supply shortage could worsen should COVID-19 cases continue to rise and would-be sellers remain hesitant about putting their homes on the market.
“Home buyers have been spurred by record-low mortgage rates and an urgency to buy or upgrade to more space, especially as much of the American workforce continues to work from home,” says Frank Martell, president and CEO of CoreLogic, in a statement. “First-time buyers in particular should remain a big part of next year’s home purchases, as the largest wave of millennials is heading into prime home-buying years.”
Despite the rapid acceleration of national home price growth, local markets continue to vary. For instance, in Phoenix, where there is a severe shortage of for-sale homes, prices increased 12.1% in October. Meanwhile, the New York-Jersey City-White Plains metro recorded only a small annual increase of 2.1%, as residents continue to seek-out more space in less densely populated areas.
At the state level, Maine, Idaho and Arizona experienced the strongest price growth in October, up 14.9%, 13.1% and 12%, respectively.
“The pandemic has shifted home buyer interest toward detached rather than attached homes,” says Frank Nothaft, chief economist at CoreLogic. “Detached homes offer more living space and are typically located in less densely populated neighborhoods. And while prices of single-family detached homes posted an annual increase of 7.9 percent in October, the price of attached homes rose only 4.5 percent year over year.”
CoreLogic’s data also reveals the disparity in expected home price growth across metros. In markets like Las Vegas, where the local tourism economy and job market continue to struggle, home prices are expected to decline 1.8 percent by October 2021. Conversely, in San Diego, home prices are forecasted to increase 7.9 percent over the next 12 months as low inventory continues to push prices up.
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