Newsfeed: The red-hot housing market isn’t sustainable—CoreLogic forecasts home price growth to slow

Entering into 2020, the nation already didn’t have enough homes built to satisfy millennials who were entering into their peak first-time homebuying years. Then the COVID-19 crisis struck. The ensuing record-low mortgage rates and flexible work from home policies—which allowed buyers to expand their home search further into the burbs—only attracted more buyers into an already tight and competitive market. Simply put: The pandemic created a perfect storm in the housing market.

But the historic run on prices could soon begin to wind down. At least that’s according to CoreLogic’s latest forecast. Between December 2020 and December 2021, the S&P CoreLogic Case-Shiller index finds U.S. home prices rose 18.8%—which is more than four times as great as the nation’s average annual rate (4.2%) posted since 1989. Going forward, CoreLogic says we should expect home price growth closer to the historical average. Between December 2021 and December 2022, CoreLogic forecasts home prices will rise 3.5%.

Already, we’re starting to see home prices decelerate a bit. Between August 2020 and August 2021, U.S. home prices climbed a record 20%. But over the following four months that 12-month growth rate has decelerated to 18.8%, as of December.

“Much of what we’ve seen in the run-up of home prices over the last year has been the result of a perfect storm of supply and demand pressures. As we move further into 2022, economic factors—such as new home building and a rise in mortgage rates—are in motion to help relieve some of this pressure and steadily temper the rapid home price acceleration seen in 2021,” writes Frank Nothaft, chief economist for CoreLogic.

In recent weeks, mortgage rates are already starting to move upward as financial markets price in future rate hikes by the inflation-concerned Federal Reserve. Last week, the average 30-year fixed mortgage rate hit 3.92%, according to Freddie Mac. That’s up from 3.11% in December. Of course, rising mortgage rates puts downward pressure on price growth—given that each uptick in mortgage rates prices out some would-be buyers.

But if rising mortgage rates do lead to decelerating home price growth, it doesn’t mean it will benefit home shoppers. After all, the sting of soaring home prices over the past two years has been lessened to a degree by pandemic-induced low mortgage rates. Now that rates are spiking, so will mortgage payments for new borrowers.

But not everyone in the real estate world agrees with CoreLogic’s deceleration prediction.

Look no further than Zillow. Just last week, the home listing site once again upped its home price forecast. Zillow now predicts the year-over-year rate of home price growth to peak at 21.6% in May, and to finish 2022 at 17.3%. That’s not a deceleration—it’s an acceleration.

Why is Zillow so bullish? It says there simply aren’t enough homes on the market. Entering into the spring housing market, inventory levels in the U.S. are down 42% below pre-pandemic levels. That supply (a.k.a. inventory) and demand (a.k.a. home shoppers) mismatch is set to push prices higher even in an environment of rising mortgage rates.

This story was originally featured on Fortune.com


More From The Real Estate Guys™…

  • Check out all the great free info in our Special Reports library.
  • Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
  • Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


Subscribe

Broadcasting since 1997 with over 600 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

 

 

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

Be the first to know when new content arrives!

Explore The Archives

Archives
Metal Ask Change
Gold $1647.32 $-0.77
Silver $18.79 $-0.21
Platinum $874.6 $1.77
Palladium $2121.02 $0.17
Gold to Silver 87.67 to 1
Gold to Platinum 1.88 to 1
Gold to Palladium 0.78 to 1

The Real Estate Guys™ Guests and Contributors Have Been Featured On: