By BETHANY BLANKLEY
THE CENTER SQUARE CONTRIBUTOR
(The Center Square) — Home prices are at a 45-year high, pricing many buyers out of an historic seller’s market, new data published by CoreLogic show.
Annual home prices were 18% higher in October of this year than they were last October, and they were also the highest recorded in the 45-year history of a Home Price Index published by the global property company.
“New household formation, investor purchases and pandemic-related factors driving demand for the limited supply of available for-sale homes continues to propel the upward spiral of U.S. home prices,” Frank Martell, president and CEO of CoreLogic, said in a statement accompanying the report’s findings. “However, we expect home price growth to moderate over the near term as many buyers take a break for the holidays.”
Single-family homes were the preferred choice for buyers over this time period, with appreciation of detached properties 6.6% higher than attached properties.
Arizona, Idaho and Utah saw the highest home price increases from October 2020 to October 2021 of over 24%.
Arizona homes saw the greatest increases in one year of 28.8%; Idaho homes sold for 28.7% more; Utah homes for 24.5% more.
Prices for single-family homes rose the most in Twin Falls, Idaho, the report found, with the highest year-over-year increase of 35.8%.
For the first time in 2021, Florida made it to the top of the list for home price gains, with homes in Naples selling for 33.5% more than the previous year.
Despite the record unaffordability of the housing market, millennials applied for more mortgages than any other generation, CoreLogic found, with the majority submitting mortgage applications being between the ages of 26 and 41.
While home prices were going up in many parts of the country, market condition indicators for homes in some regions of the country are overvalued, the report notes. With higher demand and less supply, bidding wars, and cash buyers, homes are selling for more than they are worth. Overvalued homes are primarily in the Denver-Aurora-Lakewood region of Colorado, the Houston-Woodlands-Sugarland area of Texas, the Las Vegas-Henderson-Paradise area of Nevada, the Miami-Miami Beach-Kendall area of Florida, the Phoenix-Mesa-Scottsdale area of Arizona, and the Washington-Arlington-Alexandria area of Virginia.
By contrast, not all markets are seller’s markets, the report adds.
Top markets at risk of home prices declining are in Worcester and Springfield, Mass.; Modesto and Merced, Calif., and Kalamazoo-Portage, Michigan, CoreLogic found.
Overall, recent forecasts for next year’s housing market by Fannie Mae and Zillow indicate it will be another seller’s market.
Fannie Mae’s November forecast projects a median price of a previously owned home to surpass $400,000 by the middle of 2023. It also projects that the median new-home price will reach $464,000 by the end of 2024, roughly $100,000 more than the median new-home price was in January 2021.
Zillow’s recent forecast projects home prices to increase by more than 13% from October 2021 to October 2022. It also expects federal monetary policy to tighten due to high inflation.
“Elevated inflation heightens the risk of near-term monetary policy tightening, which would result in higher mortgage rates and weigh on housing demand,” Zillow reports.
Anticipating new action by the Federal Reserve, Fannie Mae also revised it’s 30-year mortgage rate forecast from 3.1% to 3.3% for 2022.
While these forecasts don’t bode well for buyers, a silver lining does exist. Prices won’t stay at record highs and a market correction is eventually expected.
The Mortgage Bankers Association projects homes prices to start falling in the second half of 2022.
Likewise, CoreLogic expects home price gains to slow to a 2.5% annual increase by October 2022 because, it said, affordability and economic concerns will deter some potential buyers. It also expects that more homes will become available for sale.