Even amid an ongoing pandemic and an economic downturn, home prices showed no signs of slowing down just yet — a situation that could lead to an affordability crisis.
According to the latest data from property analytics provider CoreLogic, nationwide home prices grew by 8.2 percent year over year in November 2020, jumping by 1.1 percent from October to November alone. Such high growth has not been seen in the country since March 2014 and indicates an inventory shortage that, in turn, is fueling high prices and buyer competition.
Contrary to many predictions at the start of the spring, the virus did little to temper the housing market and home values for buyers. With the number of homes on the market the lowest it’s been since 1982, many homeowners are holding onto homes for various reasons — from hoping to see prices rise even further to not wanting to initiate a sales process during a pandemic.
CoreLogic
“The housing market performed remarkably well in 2020 despite the volatile economic state,” Frank Martell, president and CEO of CoreLogic, said in a prepared statement. “While we can expect to see lingering effects of COVID-19 resurgences and subsequent shutdowns in the early months of 2021, vaccine distributions and stimulus actions should revitalize economic activity and keep home purchase demand and home price growth strong.”
While great for homeowners, this type of price growth contributes to a further affordability crisis for anyone looking to buy. Younger homebuyers and renters saving for a down payment are often unable to compete with affluent buyers making all-cash offers on the same set of homes. This, in turn, leads to many stepping away from the market altogether. CoreLogic anticipates growth slowing to 7.5 percent in the first quarter of 2021 and 2.5 percent by November.
CoreLogic
“The demographic tailwind has arrived as Generation X and millennials drive housing demand,” Dr. Frank Nothaft, chief economist at CoreLogic, said in a prepared statement. “Lower-priced home values increased about one and a half times faster than higher-priced home values in November, as first-time buyers tend to seek out homes within the lower price ranges.”
Like affordable homes, some parts of the country are seeing particularly strong interest. Phoenix, where there is a shortage of for-sale homes, saw 12.6 percent growth as people from all over the country choose to move there for its booming job market.
Idaho, Maine and Indiana saw the highest November price growth at 15.7 percent, 15.4 percent and 13.6 percent, respectively. Meanwhile, Florida’s Miami, Louisiana’s Lake Charles and Arizona’s Prescott have more than 70 percent chance of seeing home prices drop altogether in 2021.