Home prices grow at the fastest annual rate since 1979

Through early summer, predictions of a cooling housing market have not become a reality.

Home prices increased 17.2% annually in June — the highest rate since 1979 — compared to 15.2% in May and 4.5% one year earlier, according to CoreLogic. It marks the fifth consecutive month the Home Price Index grew by double-digits year-over-year, rising far above forecasts made amid 2020’s uncertainty.

The ongoing inventory shortage and continued high demand driven by low mortgage rates are keeping housing values elevated. CoreLogic predicts prices will jump another 0.7% into July and 3.2% by June 2022.

“With plenty of cash on the sidelines, along with very low mortgage rates, prices are heading up and affordability will become a more acute issue for the foreseeable future,” Frank Martell, president and CEO of CoreLogic, said in the report.

By state, Idaho continued to lead the nation with a 34.2% year-over-year spike in June. Arizona, Montana and Utah trailed at 26.1%, 24.3% and 23.4%, respectively. At the opposite end, New York had the lowest rate at 6%, followed by 6.3% in North Dakota, 7.7% in Mississippi and 8.6% in Alaska.

Phoenix topped the 10 largest metro areas by surging 26.9% annually. San Diego’s 22.4%, Denver’s 18.4% and Las Vegas’s 18.3% came next.

Some markets could see housing values decline in the next year. Springfield, Mass., faces a 25% to 50% chance of falling home prices by June 2022, while Worcester, Mass., Chico and Oxnard Calif., and Norwich, Conn., all have up to a 25% probability of seeing declines.

“The pandemic sparked an increase in buyer desire for lower density neighborhoods and more living space — both inside and outside their home,” said Frank Nothaft, chief economist at CoreLogic. “Communities with single-family detached houses fill this need. Detached homes had the highest annual growth in June since the inception of the CoreLogic Home Price Index in 1976.”