A report by CoreLogic predicts that national home prices will decrease by 1.3% from April 2020 to April 2021.National home prices saw a year-over-year increase of 5.4% in April 2020, but CoreLogic sees home prices falling on the back of a tough 12 to 18 months for the broader economy.Visit Business Insider’s homepage for more stories.…
- A report by CoreLogic predicts that national home prices will decrease by 1.3% from April 2020 to April 2021.
- National home prices saw a year-over-year increase of 5.4% in April 2020, but CoreLogic sees home prices falling on the back of a tough 12 to 18 months for the broader economy.
- Visit Business Insider’s homepage for more stories.
According to the CoreLogic Home Price Index Report, national home prices saw a year-over-year increase of 5.4% in April 2020 — up from a 3.6% gain in April 2019. CoreLogic attributes the growth to a decrease in housing supply due to the pandemic. According to the report, the national for-sale inventory of entry-level homes plummeted by 25% on average in April.
“Tight supply and pent-up demand, particularly among millennials, provides optimism for a bounce-back in the housing market purchase activity and home prices over the medium term,” said CoreLogic Chief Economist Frank Nothaft.
However, the report predicts that the economic fallout caused by the virus will reverse the course of home values.
“The next 12 to 18 months are going to be very tough times for the broader economy. As employment and economic activity begin to pick up, as it will surely do, we expect housing to be a driver in a national recovery,” said Nothaft.
The HPI index has shown a year-over-year increase in every month since February 2012 and has gained 68.2% since hitting bottom in March 2011. If the predicted national annual decline of 1.3% From April 2020 to April 2021 proves true, it will be the first in over nine years.
“The very low inventory of homes for sale, coupled with homebuyers’ spur of record-low mortgage rates, will likely continue to support home price growth during the spring,” said Nothaft. “If unemployment remains elevated in early 2021, then we can expect home prices to soften. Our forecast has home prices down in 12 months across 41 states.”
CoreLogic found that home prices in April were up 1.4% month-over-month and expects a 0.3% increase from April to May. However, the report predicts that the US will see a yearly decline in the national home value as markets struggle to recover from the economic setback. For example, vacation spots like Cape Coral-Fort Myers and North Port-Sarasota-Bradenton in Florida, and Prescott in Arizona, are expected to see a decrease in home values over the next 12 months as vacationers stay home.
Bank of America has also predicted a drop in home values over the next year
In late April, BofA found that home prices will drop around 2% over the next year as a result of the coronavirus pandemic, and that they’ll hit bottom in April 2021.
Lower home prices will be a result of lower household incomes, with the typical household income expected to drop 2% lower than pre-pandemic forecasts. Prior to the pandemic, BofA had estimated that home prices would increase 4% to 5% in 2020, but now it forecasts that home prices will drop by around 2.3% before they hit a bottom in April 2021.
While both the Payroll Protection Program and the CARES Act, from the stimulus package passed in late March, were expected to soften the economic blow to the housing market, BofA predicted the lower end of the market will feel the most heat as the hospitality, travel, and energy industries grapple with the economic impacts of the outbreak.
Still, BofA noted that its home price outlook is “tame” relative to the outlook for home sales, with a near 40% decline in home sales seen in coming months, and no return to normal levels until the end of 2021. Pricing will be relatively protected because it doesn’t see a high foreclosure risk and considers the market pretty well positioned, with a lean inventory available.
In line with this latter prediction on market position, BofA released a subsequent report in May pointing to early data on buyer and builder confidence and mortgage applications suggested the housing market may have already hit bottom and was starting to recover.
According to a report by the Mortgage Bankers Association (MBA), applications to purchase a home rose 6% for the week ending May 15 compared to the week prior. In addition, BofA reported that a survey conducted by the University of Michigan found an uptick in the percentage of respondents who believe now is a good time to buy; there has also been an increase in builder confidence.
However, BofA goes on to explain that while there are early signs of a turnaround, the challenges of the current economy and the uncertainty that surrounds factors like unemployment can present obstacles and derail the recovery process.