According to a recent report from CoreLogic, national home prices increased 5.4% year over year in April 2020. The April 2020 gain was up from the April 2019 gain of 3.6%. This acceleration in home price growth could be the result of a decrease in housing supply in response to the pandemic. The economic downturn that began in March 2020 is predicted to be the catalyst of a 1.3% drop in the HPI (home price index) by April 2021. If this prediction is correct, it could be the first decline in home prices in over nine years.
“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,” said Frank Nothaft, chief economist at CoreLogic. “If unemployment remains elevated in early 2021, then we can expect home prices to soften.”
In addition, while sales are popping back up right now, historically, prices lag sales and they are not expected to hold their strength through the end of the year. The National Association of Realtors is forecasting an 11% drop in 2020 sales compared to 2019.
CoreLogic estimates that out of the nation’s 50 largest metropolitan areas, 40% were overvalued in April, 18% were undervalued, and 42% were at value. A market is considered overvalued if the current home prices exceed their long-term values by more than 10%.
Cities whose economies depend heavily on tourism, like Las Vegas and Miami – were overvalued and and are now seeing a hit from the pandemic. CoreLogic is expecting prices to drop 7.2% in Las Vegas and 4.4% in Miami by April 2021.
Conversely, Philadelphia is seeing an influx of residents from New York City and experienced the largest annual increase in home prices in April, up by close to 11%. Houston, whose economy relies primarily on the oil and gas industries, saw a mere 0.7% annual increase in home prices.
Despite the uncertainty ahead and the forecast of weaker home prices in the longer term, housing still remains a bright spot in this unprecedented and unpredictable economic picture.
“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,” said Frank Martell, president and CEO of CoreLogic. “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 national recovery.”
Still, if you want to take advantage of the current market to sell your home and maximize your return, now is the time. Low inventory and high home values are on your side. For buyers, to delay purchasing until home prices begin to decline means to risk losing the opportunity of these incredibly low interest rates that are available right now, which have already begun to rise after a better-than-expected May employment report, according to a cnbc.com report published today.
Discuss your options with a local industry expert so you can make a smart determination of what is best for your future economic picture. Call NextHome SunRaye’s St. Pete office today at (727) 343-8600. We can discuss the current market and where it’s headed, your home’s value, what kind of selling tools we offer, and what your options are. When you’re ready, we are confident that we can best represent you in selling your home and provide the most market exposure for your home to potential buyers with our arsenal of innovative marketing tools and local area market expertise. Let’s start making a plan that will solidify your goals today.