While many segments of real estate suffer from COVID standstills, homes for sale are thriving.
The latest data point is from CoreLogic's latest US home price index, which shows that annual home price growth has accelerated to the fastest level in nearly two years.
The HPI was up 5.5% year over year in July. House prices rose 1.2% from June.
"Overall, despite the shock and awe of the pandemic, the real estate industry remains absolutely solid," said Frank Martell, President and CEO of CoreLogic, in a recent comment. “A long time with record-low mortgage rates opened the floodgates for a refinancing boom that is expected to last for several years. Additionally, buying demand for a short-term COVID-19-induced slip has increased, driven by low interest rates and avid shoppers from millennials and investors. "
CoreLogic's July HPI numbers follow strong housing numbers from other sources. Real estate agency Redfin recently reported The median price of homes sold rose 10%, the largest increase in six years, to a new all-time high of $ 314,000.
CoreLogic attributed the robust home price appreciation to strong demand, supported by mortgage rates, which fell below 3% for the first time in July, and to the depletion of inventory for sale, which drove the appreciation of home prices.
While the HPI has seen a sharp appreciation in property prices over the past few months, CoreLogic expects the appreciation to slow until 2021, but will remain positive. The report found that "due to ongoing financial pressures, some homeowners are unable to make mortgage payments due to ongoing financial pressures, especially when the grace periods come to an end."
However, that's not the only factor that could slow appreciation.
"The appreciation of real estate prices is expected so slowly that fewer and fewer people can afford to buy a home," says Selma Hepp, Research and Insights and Deputy Chief Economist at CoreLogic. “Note that the recent surge in home purchases is partly due to record-low mortgage rates, which have made home buyers more affordable than last year. Given that property price growth has outpaced income growth in recent years, property price growth is expected to slow down to allow incomes to catch up. "
People's desire to get out of denser environments, which they may find a greater threat in the COVID era, could also fuel this demand for single family homes. In the report, CoreLogic said home buying activity "is growing in traditionally affordable suburbs and rural areas that have more space as schools and work stay online."
As an example, the data provider cited property prices in Nassau and Suffolk counties, which were up 4.3% year over year in July.
Fannie Maes Group for Economic and Strategic Resources recently posted a similar comment"Some early signs of a shift in buyer preference to lower density areas that may lead to additional buying activity."
However, Hepp does not expect a lasting trend. "Exodus from metropolitan areas is unlikely to be a long-term thing," she says. “As we've seen in previous crises like September 11th and hurricanes, people are eventually returning to large metropolitan areas. While the work-from-home guidelines can offer more flexibility to home buyers, greater affordability draws buyers back when house prices fall as a result of churn. Large cities are likely to remain employment centers in the future. "
