The rate of home price growth climbed to a new extreme in August, according to CoreLogic.
Annual appreciation surged by 18.1% in August, setting a new record since tracking began in 1976. It more than tripled the year-ago rate of 5.9% and shattered the “downshifted” 0.2% growth forecast from August 2020. It also marks the sixth straight month in which the Home Price Index made double-digit year-over-year gains, besting July’s 17.5% and June’s 16.6%.
“Home prices continue to escalate at a torrid pace as a broad spectrum of buyers drive demand for a limited supply of homes,” Frank Martell, president and CEO of CoreLogic, said in the report. “We expect to see the trend of strong price gains continue indefinitely with large amounts of capital chasing too few assets.”
After a 1.3% monthly increase from July, the data and analytics provider predicts prices will increase another 0.3% into September and 2.2% by August 2022.
Historically low mortgage rates and the ongoing inventory crunch have kept demand high, but housing supply has crept up recently, with more sellers coming to the market as some buyers get priced out and the number of bidding wars declines. These factors weigh down the HPI forecast for 2022, as buyer demand moderates and expected interest rate growth erodes affordability, CoreLogic Chief Economist Frank Nothaft, said in a statement to NMN.
At the state level, Idaho posted a 32.2% annual growth in August, marking its fourth consecutive month above 30% and 10th straight leading the country. Arizona, Utah and Montana followed at 29.5%, 26.2% and 24.4%, respectively. The smallest gains came in North Dakota with 7.3%, New York with 9.4% and 10.3% in both Alaska and Louisiana.
Among 10 of the largest metropolitan areas tracked in the report, Phoenix came out on top with a 30.9% annual spike. The Southwest led the way in August — and projects for more big gains in 2022 — as San Diego’s 23.2% and Las Vegas’s 22.2% came next.
Other, smaller markets face high probabilities of decreasing values in the next year. Springfield, Mass., Chico and Merced, Calif., all have a 50% to 75% chance of home price declines by Aug. 2022. Meanwhile, Norwich, Conn., and Worcester, Mass., have moderate 25% to 50% risk of falling appreciation rates.
“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.”
