Home prices surge to 6-year high, but declines are predicted for 2021
Housing price growth spiked 6.7% annually in September — matching the highest rate since May 2014 — nearly doubling the year-ago appreciation of 3.5%, according to CoreLogic's Home Price Index.
The HPI recorded positive year-over-year growth every month since February 2012. Home prices followed an upward trajectory through 2020, never increasing less than 4% annually. After August hit a 26-month high, September made the biggest monthly jump of the year thus far. This surge can be attributed to inventory bottoming out at 13-year lows, creating intense competition for prospective buyers.
CoreLogic projects that home price growth will largely subside in 2021, with a forecast HPI increase of 0.2% for next September.
"COVID has contributed to the acute shortage of inventory as the pace of new construction slowed and older prospective sellers postponed listing their homes until after the pandemic," Frank Nothaft, chief economist at CoreLogic, said in the report. "Once the pandemic passes or a vaccine is widely administered, we should see a noticeable pick-up in for-sale homes. And if the economy's recovery is sluggish next year, distressed sales may also add to market inventory."
All 50 states and the District of Columbia experienced annual increases in average home prices. Idaho continues to lead the pack and sported an 11.8% rate of growth from September 2019. Arizona and Maine followed, both increasing 11%. New York finished last with a 1.5% growth rate from last year. Illinois and Hawaii again rounded out the bottom three at 2.3% and 2.6%, respectively.
Among 10 of the largest metro areas, Phoenix posted the highest annual price growth, rising 11.1%. San Diego trailed at 7.1% and Los Angeles came in third at 6.3%. These markets have more sprawl and less condensed populations, making them more attractive during the pandemic. Conversely, the New York City metro area only inched up 0.3%.