“Home-purchase activity, bolstered by record-low interest rates, continues to exceed expectations despite the severe recession,” said Frank Martell, president, and CEO of CoreLogic. “Pent-up buyer demand was delayed from spring to summer and is reflected in the latest price data. But with elevated unemployment, purchase activity and home prices could fall off after summer.” But, that decline isn’t quite here yet. There was a 4.8 percent increase in the Housing Price Index Forecast (HPI) on a year-over-year basis in May and the monthly increase was even better than expected at 0.7 percent.
Unlike the Great Recession of 2008, the current economic downturn is not driven by the housing market, which has continued to post gains in many parts of the country. While home purchases and refinance activity up until now, suggests that the housing market will eventually bounce back, and the predicated decline in home prices will largely be due to the elevated, extended unemployment rates. Those jobless rates are expected to remain in the double digits throughout the end of the year and are certainly going to be exacerbated by the recent spike in COVID-19 cases across multiple states.
The Housing Price Index Forecast (HPI) over the May 2020 to May 2021 window is seeing a more rapid price deceleration in the face of the COVID-19 pandemic than it did in their previous 12-month forecast that ends in April of next year.
Today the company says that pent-up demand for housing and the tightening supply continued to prop up home prices in May, even as the number of coronavirus cases and levels of unemployment soared. However, the downturn is expected to be reflected in the June data and will continue throughout the summer as unemployment persists and dampens buying. The firm now anticipates that home prices that fell 0.1 percent in June and forecasts that the decline will reach 6.6 percent by May 2021.
Market Risk Indicator predicts that 125 metro areas have at least a 75 percent probability of price decline by May 2021 and prices are expected to retreat in every state across the country. While some harder-hit areas may also experience a slower comeback after the COVID19 pandemic is over, factors such as low mortgage interest rates and a shortage of for-sale homes supply have already supported prices in some metros and may also encourage home price stabilization nationwide.
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