April home values rose by 5.4 percent year-over-year and 1.4 percent from the previous month, according to the latest data from CoreLogic, an indication that a pandemic-induced drop in home value growth has not materialized.
The spike was caused in part by springtime buying and pent-up demand. Pre-pandemic factors such as low inventory and mortgage rates have also contributed to the growth in prices. Nonetheless, CoreLogic predicts growth will begin slowing soon, with a 1.3 percent drop forecasted by April 2021.
“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,” Dr. Frank Nothaft, chief economist at CoreLogic, said in a statement. “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.”
After nine years of uninterrupted growth, home prices could fall for the first time in 2021. Some of the cities most likely to see declines include Prescott, Arizona; Huntington, West Virginia; Cape Coral-Fort Myers, Florida; and College Station-Bryan, Texas. Philadelphia, meanwhile, experienced much higher home price growth, 10.6 percent, in no small part due to the New Yorkers trying to move there in the wake of the pandemic.
But even if home prices fall, it is not clear whether affordability will improve. While some are currently using low rates to secure lower monthly payments on both attached and single-family homes, low inventory and high levels of unemployment may push many out of buying a home.
“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,” Frank Martell, president and CEO of CoreLogic, said in a prepared statement. “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.”