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Biggest price gain since November 2005
According to CoreLogic’s latest CoreLogic Home Price Index, converging pressures of severe inventory shortages and sustained demand pushed home prices to record highs in May 2021, with the year-over-year increase in home prices at its highest level since 2005.
While many millennials and Gen Z home buyers continue to move into the hot market thanks to low borrowing rates, high prices are likely deterring increasing numbers of prospective buyers — especially first-time and low-income families.
Currently, 82% of consumers note housing affordability as a key problem, according to a recent CoreLogic survey. Additionally, 33% of respondents noted they would wait to buy or not buy at all rather than make sacrifices on their purchase.
“First-time buyers are hitting a wall in many places around the country as the pace of home price rises outpace the benefits of lower borrowing costs. Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,” said Frank Martell, president and CEO of CoreLogic. “As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.”
“There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Today, loans with high-risk features are absent and mortgage underwriting is prudent. However, demand and supply imbalances — fueled by a drop in mortgage rates to less than one-half what they were in 2005 and a scarcity of for-sale homes — has fed the latest run up in sales prices.”
Top Home Price Index Takeaways:
- Nationally, home prices increased 15.4% in May 2021, compared with May 2020. On a month-over-month basis, home prices increased by 2.3% compared to April 2021.
- Appreciation of detached properties (17.2%) was nearly double that of attached properties (9.1%) in May as prospective buyers continue to seek out more space.
- Home prices are projected to increase 3.4% by May 2022, as affordability challenges deter potential buyers and cause a slowdown in home price growth.
- In May, home prices rose sharply in the west with Twin Falls, Idaho, experiencing the highest year-over-year increase at 35%. Coeur d’Alene, Idaho, ranked second with a year-over-year increase of 32%.
- At the state level, Idaho and Arizona continued to have the strongest price growth at 30.3% and 23.4%, respectively. Utah also had a 20.4% year-over-year increase as home buyers seek out more affordable locations with lower population density and attractive outdoor amenities.
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