Home prices shot up beyond last year’s predictions as coronavirus impacts generated a perfect storm for rapid growth but the pace is expected to slow this year, according to CoreLogic.
The data provider’s Home Price Index jumped 10% year-over-year in January and 0.9% from December. It marked the largest annual growth in the index since November 2013. The rate nearly doubled the year-ago forecast of 5.4%, but that was prior to the pandemic’s economic impact and radical disruption of the housing market.
As mortgage rates kept falling to new all-time lows, buyer demand skyrocketed. That shrunk already tight inventory even further, creating another factor that pulled housing values higher. CoreLogic’s HPI averaged annual monthly gains of 5.7% over the course of 2020 and 3.8% in 2019.
The surging values brought homeowners a combined $3.1 trillion in equity in 2020, according to a separate report from Redfin. The total worth of the U.S. housing market rose by 10% to $32.4 trillion in January 2021 from $29.3 trillion the year prior, the Redfin report found.
However, with interest rates growing congruently with rebounding employment and vaccine rollouts, price growth could lessen as the year goes on. CoreLogic predicts a 0.5% rise into February and a 3.3% increase by January 2022.
“Heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers,” Frank Martell, president and CEO of CoreLogic, said in the report. “While new construction may help balance home prices towards the end of 2021, we may expect to see demand slow in the medium-term.”
At the state level, Idaho home prices led the country by spiking 21% year-over-year in January. Montana followed at 17.4% with Indiana and Maine tied for third at 15.3%. At the opposite end of the spectrum, New York and North Dakota saw the lowest growth at 5.3%. Home prices in Louisiana and Iowa followed at 7.2% and 7.3%, respectively.
Among the 10 largest metro areas, Phoenix experienced the biggest jump, surging 14.8% annually. San Diego trailed with 11% and Washington D.C. at 9.1%.
