Home prices continued to shatter projections through the winter as national home prices grew 9.2% year over year in December, according to the latest Home Price Index (HPI) report from CoreLogic.
December’s increase more than doubled the 4% gain from the same month one year prior, registering as the largest annual jump since February 2014.
Every state showed annual increases in HPI during December, led by states that have seen an influx of new homebuyers from nearby expensive markets. Idaho topped the list with a 19.1% year-over-year climb in HPI followed by Indiana at 16.1% and Maine at 15.2%. Montana and Connecticut saw the biggest acceleration in home price growth from December 2019 to December 2020; Connecticut notably, went from price growth near zero in December 2019 to appreciation of 10.5% in December, thanks in part to buyers expatriating from New York City and other close metros.
Nationally, December’s increase brought price gains to an average of 5.7% for the full year of 2020, up from 2019’s 12-month average of 3.8%. Price growth escalated as the year went on, starting out of the gate at a moderate first quarter rate of 4.3% before gaining steam to 8.3% in the fourth quarter, confirming the housing market’s resilience in the midst of the ongoing COVID-19 crisis.
“At the start of the pandemic, many braced for a Great Recession-era collapse of the housing market,” said Frank Martell, president and CEO of CoreLogic. “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.”
Indeed, the current downturns stands as one of two recessions among the last six to not slow the growth of home prices. Ten months in, the 2020 has closely followed the path of the short recession from April to November 2001, in which the inflation-adjusted HPI actually grew around five points; in contrast, during the Great Recession of 2008 to 2009, inflation-adjusted HPI was about 20 points lower at the end of the downturn compared to the beginning. Of course, that recession was heavily tied to the housing market and was typified by a glut of for-sale homes — far from a problem during the current days of historically low inventory.
“Two record lows are fueling home price gains: for-sale inventory and mortgage rates,” said Frank Nothaft, chief economist for CoreLogic. “Prospective sellers with flexible timetables have opted to delay listing their home until the pandemic fades or they are vaccinated. We can expect more inventory to come available in the second half of the year, leading to slowing in price growth toward year-end.”
Considering the persistent shortage of homes for sale, CoreLogic, like others, noted that affordability concerns may be on the rise, with some prospective buyers priced out of the market in 2021 despite soaring demand. Despite the aforementioned projection of slowing price gains, appreciation is expected to remain high during the opening six months of 2021, with CoreLogic anticipating full-year average growth to rise to 6.9%. From December 2020 to December 2021, CoreLogic expects home prices to increase 2.9%.
