High demand, limited supply continue to push home prices upward

Home price growth has continued to accelerate, as October's annual appreciation rate of 7.3% was the fastest since April 2014, according to CoreLogic.

Supply and demand remain the biggest drivers of price growth, with the reluctance of potential sellers to list during the pandemic remaining a leading constraint on housing market activity, CoreLogic pointed out.

On a month-to-month basis, prices grew by 1.1% from September.

October's annual growth rate exceeded CoreLogic's forecast one year ago, when it projected a 5% increase in home prices over the succeeding 12 months. It also surpassed September's annual growth rate of 6.7%.

The expected increase in newly constructed homes coming on to the market should relieve the supply issue somewhat, although demand will keep growing in 2021.

"First-time buyers in particular should remain a big part of next year's home purchases, as the largest wave of millennials is heading into prime home-buying years," CoreLogic President and CEO Frank Martell said in a press release.

Still, CoreLogic predicted that over the next 12 months, home prices will grow by 1.9%. But it hedged the bet, saying if the economic recovery from the pandemic is more robust than expected, prices could actually increase more.

The shift away from urban markets can be seen in the difference in single-family home prices between detached and attached (including condominium and duplex) properties.

"Detached homes offer more living space and are typically located in less densely populated neighborhoods," said Frank Nothaft, CoreLogic's chief economist. "And while prices of single-family detached homes posted an annual increase of 7.9% in October, the price of attached homes rose only 4.5% year over year."

Going forward, CoreLogic cited five markets that had a high probability of seeing declining prices over the next 12 months. That list included two Gulf Coast metros which had been subject to hurricane damage this fall: Lake Charles, La., where the probability of a price decline was above 70%, and Gulfport-Biloxi, Miss., with a 50% to 70% probability of prices dropping.

The only other metro with a probability over 70% was Prescott, Ariz., while Las Vegas and Miami were in the 50% to 70% range.