CoreLogic® recently released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for December 2020, providing a lookback at the state of the housing market and the pandemic’s impact on home price performance throughout 2020.
The housing market exceeded expectations in 2020, closing out the year with the highest annual home price gain since February 2014 in December at 9.2%. Despite a blip in April, home-purchase demand surged as record-low mortgage rates persuaded first-time homebuyers to enter the market. Meanwhile, the consequences of the pandemic were seen in the dwindling supply of homes—dropping, on average, 24% below 2019 levels—as homeowners delayed selling.
These factors translated to significant home price growth in 2020, surpassing the previous year’s levels with an average monthly year-over-year gain of 5.7%, compared with 3.8% in 2019. However, with the severe shortage of for-sale homes, we may see rising affordability concerns and some prospective buyers priced out of the market in 2021.
– Nationally, home prices increased 9.2% in December 2020, compared with December 2019. On a month-over-month basis, home prices increased by 1% compared to November 2020.
– December 2020 gains across all of the 10 select metropolitan areas surpassed their December 2019 levels.
– Affordability concerns continue to persist as prices continue to steeply rise. For instance, in San Diego, prices increased 10.4% year-over-year in December 2020 compared to the 3% gain December 2019. San Diego home prices are also forecasted to increase an additional 8.2% over the next 12 months.
– At the state level, Idaho, Indiana and Maine had the strongest price growth in December, up 19.1%, 16.1% and 15.2%, respectively.
“At the start of the pandemic, many braced for a Great Recession-era collapse of the housing market,” said Frank Martell, president and CEO of CoreLogic. “However, market conditions leading into the crisis—namely low home supply, desire for more space and millennial demand—amplified the rapid acceleration of home prices.”
“Two record lows are fueling home price gains: for-sale inventory and mortgage rates,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Prospective sellers with flexible timetables have opted to delay listing their home until the pandemic fades or they are vaccinated. We can expect more inventory to come available in the second half of the year, leading to slowing in price growth toward year-end.”
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