With coronavirus constraining supply, home prices are up
Price appreciation jumped 5.4% annually in April and 1.4% month-over-month, according to CoreLogic's Home Price Index.
Those figures increased from the respective year-ago gains of 3.6% and 1%. The data provider forecasts that prices will climb 0.3% in May from the April 2020 average.
All 50 states posted annual increases in average home price, but April 2020 marked the 22nd consecutive month of annual price growth below 6%. That streak could end this summer if mortgage rates hover at historic lows, stay-at-home orders lift and housing inventory remains constrained.
"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," Frank Martell, president and CEO of CoreLogic, said in the report. "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 a national recovery."
The pandemic certainly magnified the ongoing supply deficits by giving homeowners a reason to stay put for longer.
The amount of time homeowners remain in a property increased annually in April in all 50 metropolitan areas analyzed in a report by First American. The average length exceeded 12 years, with annual growth swelling from 7.6% in February to 8.5% in both March and April.
"As more homeowners were reluctant to list their homes for sale amid the pandemic, the supply of homes available to potential homebuyers dwindled further," Odeta Kushi, deputy chief economist at First American, said in a press release. "You can't buy what's not for sale. Lack of supply relative to demand is a sure-fire recipe for increasing house price appreciation."
Forty percent of homes were overvalued in April, while 18% were undervalued and 42% were at value, according to CoreLogic's analysis of the 50 largest U.S. markets by housing stock.
The largest average price jumps came at 12% in Idaho, 8.3% in Arizona and 8% in both Indiana and Missouri. However, things may invert at the state level next year.
"If unemployment remains elevated in early 2021, then we can expect home prices to soften. Our forecast has home prices down in 12 months across 41 states," said Frank Nothaft, CoreLogic's chief economist.