Home-price Gains Will Pick Up Speed
August 26, 2020
Home-price gains will pick up speed in the coming year, with a 5.4% jump in the 12 months following July 2019, according to a forecast from CoreLogic. That would be a faster pace than the 3.6% annualized increase seen this July, CoreLogic said.
Low mortgage rates coupled with a scarcity of inventory are driving gains in home prices because lower financing costs mean borrowers can qualify for bigger mortgages. A shortage of homes for sale, especially in lower-price segments of the market, are giving sellers the opportunity to hold out for the prices they want.
Also supporting home-price gains is an increase in U.S. household income, said Frank Nothaft, CoreLogic’s chief economist. The unemployment rate was 3.7% in July, near May’s 3.6% that was lowest level since the 1960s. That’s forcing employers to pay higher wages to keep good workers. The U.S. median annual household income in June was 1.8% higher than a year earlier, according to a report from Sentier Research based on inflation-adjusted Census Department data.
“With the for-sale inventory remaining low in many markets, the pick-up in buying has nudged price growth up,” Nothaft said. “If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year.”
MBA & Fannie Mae
CoreLogic’s projection is above the most-recent forecasts from the Mortgage Bankers Association and Fannie Mae. MBA estimates a 3.8% gain for U.S. home prices over the next year, measuring the third quarter of 2020 from a year earlier. Fannie Mae, the largest mortgage finance company, puts it at 4.3%.