Home prices grew by 4 percent year-over-year in January and are expected to keep rising, according to the latest CoreLogic Home Price Index and Forecast report released Tuesday.
Across the U.S., home prices were stable between December and January. But that stability is not expected to last for long — CoreLogic predicts that home prices will spike by 5.4 percent by January 2021, in no small part due to a strong economy and dearth of available housing on the market.
“January marked the third consecutive month that annual home price growth accelerated in our national index, as low mortgage rates and rising income supported home sales,” Dr. Frank Nothaft, chief economist at CoreLogic, said in a prepared statement. “In February, mortgage rates fell to the lowest level in more than three years, which likely will spur additional home shopping activity and price appreciation.”
Idaho, South Dakota and Missouri saw the highest price spikes at 10.5, 9.3 and 7.6 percent, respectively. Connecticut, meanwhile, was the only state to see a decrease in home price growth although at, 0.1 percent, the drop was very small.
And while the projected home price boom feels like great news to homeowners, it is also creating affordability challenges and stalling the market. Forty-four percent of millennials consider homebuying to be out of reach while others are putting off the purchase until a future time.
“Despite a slowdown in home price growth last summer, annual appreciation is beginning to stabilize,” Dr. Frank Martell, president and CEO of CoreLogic, said in a prepared statement. “While just under half of millennials feel confident they can afford to purchase a home, housing starts have shot up, and mortgage rates have come down, which has helped improve affordability and spur overall housing demand.”