Across the country, home prices have been growing steadily but at a slower rate than in previous years — February 2016 saw peak year-over-year growth at 4.2 percent. But according to CoreLogic, that trend may be about to reverse itself. The property analytics provider predicts that home prices will peak to 5.6 percent growth by September 2020.
The predicted growth is caused in part due to increases in homebuying ability. According to CoreLogic, low mortgage rates and a strong economy are allowing more people to make the leap to homeownership while available inventory struggles to keep up with demand. Presently, 36 percent of the country’s largest cities have an overvalued housing market which means that incomes are not rising as fast as home prices.
“Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership,” said Dr. Frank Nothaft, chief economist at CoreLogic, in a prepared statement. “In addition to lower interest rates, personal income grew faster than home prices during the past year.”
But despite the predicted upticks, millennials in particular are not feeling confident in their ability to one day be able to buy a home. Only one in five millennials view buying a home as affordable while 42 percent of older millennials (aged from 30 to 38) said they spent more on their home purchase than expected — $383,000 with a 16 percent downpayment, on average.
“As a group, more millennials are entering the home-buying market and they report spending more money than they anticipated,” said Frank Martell, president and CEO of CoreLogic, in a prepared statement. “This may impact their future financial planning. Millennials age 30-38 put down less than 20% for a down payment over the past three years and used funds from their retirement accounts to cover an average of 7% of that down payment.”