Home prices are continuing to grow while, in some states, creating serious affordability issues, according to a new CoreLogic report released Tuesday.
Nationwide, home prices grew 4 percent year over year and 0.7 percent month to month in February, according to the latest data. Even though growth is slower than it was during the same period last year, expect prices to increase soon, said Dr. Frank Nothaft, CoreLogic’s chief economist.
“With the Federal Reserve’s announcement to keep short-term interest rates where they are for the rest of the year, we expect mortgage rates to remain low and be a boost for the spring buying season,” Nothaft said. “A strong buying season could lead to a pickup in home-price growth later this year.”
CoreLogic also predicts home prices will grow 4.7 percent by February 2020 — driven, in part, by more people taking advantage of low mortgage rates and a rush of activity this spring.
Some states have seen stark growth in home values. In Idaho and Nevada, home prices rose by 10.2 percent and 8.9 percent, respectively. North Dakota was the only state to see home values go down. The average home in the state now costs 1.7 percent less than it did a year ago.
As a result, sluggish growth will go unnoticed by homebuyers who are struggling to afford homes as incomes fail to keep up with home prices for average families. Based on CoreLogic’s survey of generational differences, millennials and first-time homebuyers fare badly when it comes to housing. Unlike older adults, nearly three quarters of millennials cut back on vacations, eating out and entertainment to afford housing.
“The cost of either buying or renting in expensive markets puts a significant strain on most consumers,” CoreLogic President Frank Martell said in a statement. “Our research tells us that about 74 percent of millennials, the single largest cohort of homebuyers, now report having to cut back on other categories of spending to afford their housing costs.”