Home prices grew by 4 percent year-over-year in December and are expected to soar an additional 5.2 percent by the end of the year, according to the latest CoreLogic Home Price Index and Forecast report released Tuesday.
Home values grew nationwide by 0.3 percent month-over-month and 4 percent year-over-year, according to CoreLogic. Powered by a strong job market and economy, the numbers have grown steadily since 2012 but may soon see far more drastic increases.
In no small part, the growth is caused by steep demand for affordable homes. With a dearth of homes priced below 25 percent of an area’s median price, bidding wars loom large and first-time buyers are forced to make higher offers. The most dramatic home value growth was observed in Idaho, Maine and Wyoming at 9.9 percent, 7.9 percent and 7.7 percent, respectively.
“Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers,” Dr. Frank Nothaft, chief economist at CoreLogic, said in a press statement. “Homes that sold for 25 percent or more below the local median price experienced a 5.9 percent price gain in 2019, compared with a 3.7 percent gain for homes that sold for 25 percent or more above the median.”
CoreLogic predicts that home values will grow by 5.2 percent by December 2020. And while the growth spikes are great for current homeowners, they are creating affordability concerns and causing market lulls as first-time buyer press pause on purchasing altogether.
“Price growth is likely to accelerate in 2020,” CoreLogic CEO Frank Martell said in a statement. “And while demand for homeownership has continued to increase for millennials, particularly those in their 30s, 74 percent admit they have had to make significant financial sacrifices to afford a home. This could become an even bigger factor as home prices reach new heights during 2020.”