A new housing report by real estate data analytics provider CoreLogic found that home price growth intensified in January.
A new housing report by real estate data analytics provider CoreLogic found that home price growth intensified in January as elevated demand and low mortgage rates continued to give sellers the upper hand.
Consumers looking to purchase a home have remained optimistic moving into the new year, with more expecting to buy over the next six months as rapid home price appreciation is forecasted to slow.
Despite market and economic challenges such as low inventory, continued buyer competition and declining affordability, potential buyers are ready to move while mortgage rates remain relatively low. Consumer optimism coupled with generational-low inventory pushed home price growth to the highest level since at least January 1977.
CoreLogic’s top takeaways:
Nationally, home prices increased 19.1% in January 2022, compared to January 2021. On a month-over-month basis, home prices increased by 1.4% compared to December 2021.
In January, annual appreciation of detached properties (20.3%) was 5.1 percentage points higher than that of attached properties (15.2%).
Home price gains are projected to slow to a 3.8% annual increase by January 2023.
January marked the second consecutive month Naples (38.9%) and Punta Gorda (38.3%), Florida, logged the highest year-over-year home price increases.
At the state level, the Mountain West and Southern regions continued to dominate the top three spots for national home price growth, with Arizona leading the way at 28.3%. Florida ranked second with a 27.9% growth, and Utah followed in third place at 25.2%.
“In December and January, for-sale inventory continued to be the lowest we have seen in a generation,” said Frank Nothaft, chief economist at CoreLogic. “Buyers have continued to bid prices up for the limited supply on the market. However, the rise in mortgage rates since January further eroded buyer affordability and is expected to slow price gains in coming months.”
Lawrence Yun, chief economist for the National Association of Realtors points out that with inventory at an all-time low, buyers are having a difficult time finding a home.
Alongside persistent supply constraints, Yun said house hunters are contending with a number of additional market issues, including escalating home prices and rising interest rates. Rates jumped by nearly a percentage point in January from December, further adding to monthly mortgage costs.
“Given the situation in the market – mortgages, home costs and inventory – it would not be surprising to see a retreat in housing demand,” said Yun.
The National Association of Realtors expects economic conditions to be volatile in the coming months. The impending conclusion of the Federal Reserve’s asset purchase program in March paves the way for higher interest rates. Russia’s aggression in Ukraine is also likely to affect global oil supply, imposing further burdens on inflation and bringing about more aggressive rate hikes.
Yun added, “There’s also the possibility that investors may flee toward safer U.S. Treasury bonds, which may result in temporary short-term relief to interest rates.”