Will Home Prices Continue to Rise in 2021?

Home prices, including sales of distressed properties, increased by 9.2% in December 2020 compared with December 2019, according to CoreLogic’s most current Home Price Index report covering December. Month-over-month, those prices increased by 1% compared to November.

CoreLogic’s HPI Projection recommends house prices will increase on a month-over-month basis by 0.2% from December 2020 to January 2021, and on a year-over-year basis by 2.9% from December 2020 to December 2021.

“At the start of the pandemic, many braced for a Great Recession-era collapse of the housing market.” said Frank Martell, CoreLogic’s CEO and President. “However, market conditions leading into the crisis– namely low home supply, desire for more space and millennial demand– amplified the rapid acceleration of home prices.”

Two record lows are driving the gains in home values, says CoreLogic’s Chief Economist Frank Nothaft. That is, record low for-sale stock and record-low home mortgage rates.

“Prospective sellers with flexible timetables have opted to delay listing their home until the pandemic fades or they are vaccinated,” Nothaft stated. “We can expect more inventory to come available in the second half of the year, leading to slowing in price growth toward year-end.”

On a nationwide scale, home prices grew 9.2% year over year in December. No states published a yearly decline in house prices. The states with the highest increases year-over-year were Idaho (19.1%), Indiana (16.1%), and Maine (15.2%).

CoreLogic further breaks down the home price data by metros, showing Phoenix leading the home-price-increase at 13.7% year over year.

On the other hand, The HPI Forecast likewise exposes the continued variation in local home price development.

“In markets like Houston, which was hit hard by the collapse of the oil industry and the current storm season, home prices are anticipated to decline 1% by December 2021,” the report revealed.

CoreLogic’s Market Risk Indicator, its monthly update of the overall health of housing markets across the country, forecasts that cities such as Lake Charles, Louisiana and Prescott, Arizona, are at the greatest danger (above 70%) of a decrease in home costs over the next year, while Miami, Beaumont-Port Arthur, Texas, and Modesto, California, are at moderate danger (50%-70%) of a decrease.