Exceptionally strong demand, historically low supply and record low mortgage rates combined for the fastest home price growth since 2018.
Nationally, house prices in July were 5.5% higher than in 2019. This is a significant increase from the 4.3% annual gain seen in June, according to Corlogic.
The onset of the coronavirus epidemic due to the fall in mortgage rates has helped increase the demand for paint-ups since spring. The average rate on the popular 30-year fixed also fell below 3% for the first time in July, giving buyers extra purchasing power.
Potential buyers visit open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters
“Low-cost homes are being explored and annual prices are growing faster than luxury homes,” said Frank Nothef, chief economist at Corlogic. “First-time buyers and investors are actively looking for homes at lower prices, and that part of the housing market is particularly in short supply.”
Home inventory worth $ 100,000 was down 32% year-on-year in July, according to the National Association of Realtors. Compare that with the supply of homes priced from ,000 500,000 to 50 750,000, down just 9%.
Of course, all real estate is local and especially now the epidemic is hitting some markets harder than others. Home buying is gaining significant power in more affordable suburban and rural areas as buyers find more space for new work-and-school-home-home economies. Corelogic is in charge of Norse and Solk Flock counties on Long Island, New York, where house prices rose 3.%% annually in July, probably due to a city flight from New York City. Prices in the New York metropolitan area rose only 0.4%.
Home prices in San Francisco were also lower than 1% annually, compared to the San Shengton, DC, metropolitan area, which saw a 5% increase in prices. There are far fewer flights from San Francisco to the DC area, as tech workers, who can now work anywhere, leave the latter in search of more affordable housing.
Corloc logic economists predict that homes will remain positive in 2021, but gains will weaken in the wake of an early surge in epidemic purchases. Certain markets, especially those plagued by epidemics, may suffer the most. Las Vegas and Miami are notable examples because their economies rely heavily on tourism and recreation.
There are also concerns that as the various mortgage bailout programs begin to expire, sales of distressed homes will increase. Given the current housing shortage, the market will quickly absorb these homes, with additional supplies taking a bit of heat out of house prices.
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