- September was another strong month for home prices in the US.
- Home prices nationwide saw a 6.7% year-over-year increase in September, according to a CoreLogic report.
- However, accelerated growth will soon slow down, CoreLogic’s chief economist, Dr. Frank Nothaft, told Business Insider, projecting home prices in September 2021 will see a year-over-year increase of just .2%.
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September was another strong month for the US housing market.
Home prices nationwide increased 6.7% year-over-year, per a new report by CoreLogic, the fastest annual acceleration the data company has reported since May 2014.
The catalysts of this sharp growth include rising demand due to low mortgage rates coupled with a shortage of inventory, said CoreLogic’s chief economist, Dr. Frank Nothaft.
A reason for the low mortgage rates is the economic uncertainty brought on by the coronavirus pandemic, Zillow’s Matthew Speakman explained to MarketWatch in June. This resulted in a “sell-off in stocks and a flight to the safe haven of bonds — something that normally pushes mortgage rates lower,” Speakman said.
The low rates and the limited number of properties on the market have created the perfect storm to buoy home prices.
“We have rising demand confronting a shortage of supply, and that translates to accelerated home price growth,” Nothaft told Business Insider this week.
National for-sale inventory in September 2020 was 40% less than in September 2008 and 75% less than in September 2000, according to the National Association of Realtors and US Census Bureau.
The inventory shortage, Nothaft said, is due, in part, to “older homeowners” who were going to sell their homes but have decided to wait to move because of the pandemic. Other homeowners, he added, have decided not to list their properties for other reasons.
Upward pressure is expected to continue through 2020, but home prices will level out by late 2021
Home prices will stabilize in the next year, according to Nothaft.
“As we look into 2021, especially if we’re looking out the next 12 months to late summer and early fall, I believe the pandemic will either have waned or we will have a vaccine,” Nothaft said.
The easing of the public-health crisis will bring in an increase in homes for sale, Nothaft said, which would slow home price growth. The uptick in inventory in 2021 will be a combination of people who were already planning to list their homes in that year, people who held off listing in 2020, people in who need the money from a home sale because of pandemic-driven economic needs, and a general uptick in single-family construction.
Annual home price growth is expected to dwindle to 0.2% by September 2021, according to the CoreLogic report.
The drop will be gradual, Nothaft warned.
For the remainder of 2020, Nothaft says home prices will likely continue to accelerate at a similar pace to September.
But as we approach December and January, that growth will begin to slow down. By the spring, Nothaft believes that additional inventory hitting the market will begin to level out home price growth.