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A recent report by CoreLogic found that national home prices saw a 5.5% year-over-year increase in July.
However, with an expected growth in unemployment, CoreLogic expects growth to slow down drastically by July 2021.
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Markets across the country are heating up as the demand for affordable homes soars and supply falls, resulting in a competitive climate and rising prices.
Over the past several months, real estate has seen suburban, and suburban-like, markets heat up as prospective homeowners seek larger spaces and cheaper prices. Paired with historically low mortgage rates and low inventory, that has made buying a home more competitive than ever in some places.
A recent report by CoreLogic found that national home prices in July saw a 5.5% year-over-year increase, the fastest growth rate since August 2018.
The CoreLogic report also forecasts that August will clock in with a 0.1% month-over-month increase, and by July 2021, home prices will have seen a 0.6% year-over-year increase.
Why housing prices may have hit a plateau
As CoreLogic explained, the recipe for July’s growth includes low inventory, strong purchase demand, and historically low mortgage rates, which fell below 3% for the first time ever.
But home prices are expected to lose steam. According to CoreLogic, the likely higher unemployment will likely increase distressed-sale inventory, especially when forbearance periods begin to end. In addition, a new fee of 0.5% on most mortgage refinances, set to go into effect on December 1, may push homeowners to sell.
“Because of this, some homeowners who have been reluctant to sell this year may choose to list their homes. Of course, this could also lead to more demand for homes when those sellers buy again. Therefore, we will likely see new listings and home sales both climb higher after the rule goes into effect,” a report by Redfin reads.
That same report found that for the four-week period ending August 9, the median price of homes sold was up 10% to $314,000, the biggest increase in more than six years. And even though demand is plateauing, per Redfin, supply is also falling, causing home prices to increase. According to the report, the amount of active homes for sale during the four-week period ending on August 9 was down 28%.
Some local markets will see price drops
On a local level, different locations tell different stories. For example, while San Diego is expected to see a 5.8% increase in home prices by July 2021, with a lack of supply serving as the catalyst, Las Vegas is expected to see a 7.8% decline.
Looking at Las Vegas, CoreLogic predicts that home prices will drop because of the impact the pandemic has had on the local tourism economy and job market.
More suburban-like markets, like Suffolk County and Nassau County are experiencing very competitive markets with homebuyers looking for larger spaces due to the need to work from home and a school year geared toward remote learning. In fact, both counties saw a 4.3% increase in home prices in July. …read more
Source:: Business Insider