In an unexpected turnaround from stilted growth at the start of the pandemic, home prices rose at the highest rate since 2018 this August.
Nationwide, home prices grew by 5.5 percent year over year in July, up 1.2 percent from last month. Such a spike is unexpected given the months of slow growth observed as the pandemic first hit the U.S. in the spring and summer.
Even amid high rates of unemployment and market uncertainty around the pandemic, demand for homes is driving strong growth. A combination of low inventory and historically low mortgage rates (they dropped below 3 percent for the first time in 50 years in July) is pushing people to buy now, CoreLogic reports.
“On an aggregated level, the housing economy remains rock solid despite the shock and awe of the pandemic,” Frank Martell, president and CEO of CoreLogic, said in a press statement. “A long period of record-low mortgage rates has opened the flood gates for a refinancing boom that is likely to last for several years.”
While initial predictions forecasted a cooling of price growth or even a decline amid the pandemic, updated analysis now shows a much more optimistic outlook for the rest of 2020 and into 2021.
“In addition, after a momentary COVID-19-induced blip, purchase demand has picked up, driven by low rates and enthusiastic millennial and investor buyers,” Martell said. “Spurred on by strong demand and record-low mortgage rates, we expect to see more home building in 2021 and beyond, which should help support a healthy housing market for years to come.”
But rates are, naturally, not the same in all pockets of the country. Boston saw only 2.9 percent growth while San Diego saw 5.2 percent growth. Places that have high rates of COVID-19 and are highly dependent on the tourism and entertainment industries are not expected to reel in the benefits of the low mortgage rates. CoreLogic predicts Las Vegas to see a 7.2 percent home price drop by July 2021.
Additionally, dense metro areas like that of New York City saw minimal price growth (0.4 percent) while the more suburban and rural Nassau and Suffolk counties on Long Island saw an annual gain of 4.3 percent.