For the second month in a row, CoreLogic’s nationwide Home Price Index (HPI) saw its highest annual home price gain in over six years.
The HPI was up 7.3% year over year, easily surpassing last October’s appreciation rate of 3.5% and reaching its highest pace of growth since April 2014. The strong showing follows a September in which the HPI saw the fastest rate of appreciation since May 2014, further cementing the home price surge the market has seen since the onset of autumn.
The HPI also picked up month over month, with prices increasing 1.1% from September.
“Home buyers have been spurred by record-low mortgage rates and an urgency to buy or upgrade to more space, especially as much of the American workforce continues to work from home,” said CoreLogic President and CEO Frank Martell. “First-time buyers in particular should remain a big part of next year’s home purchases, as the largest wave of millennials is heading into prime homebuying years.”
That wave of first-time buyers will have to contend with prices continuing to rise fastest at the least expensive end of the market. CoreLogic breaks the market down into four tiers for its analysis, with every tier seeing home price growth accelerate to their highest rates since 2014. The lowest price tier saw prices grow 10.9% year over year, compared to 9% for the low- to middle-price tier, 8.5% for the middle- to moderate-price tier, and 7.4% for the highest price tier.
COVID-19 continues to play a big price in home price trends, with the gains of recent months driven as much by unwavering supply constraints as heightened demand. As much as the pandemic has exacerbated that shortage, CoreLogic acknowledged that scarcity could further intensify as COVID cases see a cold weather surge and potential sellers remain reluctant to put their homes on the market.
The pandemic has also shifted buyer interest toward detached homes as opposed to attached homes, and that’s reflected in the price data.
“Detached homes offer more living space and are typically located in less densely populated neighborhoods,” explained Frank Nothaft, chef economist for CoreLogic. “And while prices of single-family detached homes posted an annual increase of 7.9% in October, the price of attached homes rose only 4.5% year over year.”
And with homebuyers eschewing density for affordability and space, the largest October year-to-year increases among states were in Maine (up 14.9% from October 2019), Idaho (13.1%) and Arizona (12.0%) — three states that are near large urban gateways and are receiving large numbers of outbound homebuyer migration.
Despite the robust price gains at present, CoreLogic still expects the pandemic-triggered economic downturn to eventually slow the HPI’s annual growth to 1.9% by October 2021. If realized, that would be the lowest annual uptick in home prices since March 2012.