Home Price Appreciation Broke an 8-Year Record in January

CoreLogic says home prices in January were 10 percent higher than a year earlier. It was the first double digit increase in the company's Home Price Index (HPI) since November 2013. The company had reported a 9.2 percent annual increase in December. The month-over-month increase in home prices nationwide, including distressed sales, was 0.9 percent.

Frank Martell, President and CEO of CoreLogic said, "Record-low mortgage rates were a significant driving force behind last year's rebound in housing market activity. However, heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers. While new construction may help balance home prices towards the end of 2021, we may expect to see demand slow in the medium-term."

In a survey conducted last month by CoreLogic, nearly 76 percent of U.S. non-homeowners, aged 18 or older, said they have no plans to purchase a home within the next six months. Forty-three percent said the biggest deterrent was affordability constraints, specifically, not having enough money for a down payment or mortgage.

"Despite first-time buyers driving high demand, entry-level homes remain in short supply. Homes priced below 75 percent of the local median price had 14 percent annual appreciation, negating most of the benefits of record-low mortgage rates", according to Frank Nothaft, CoreLogic's chief economist. "When interest rates rise, the affordability squeeze for first-time buyers will become even more of a challenge."

The states with the highest increases year-over-year were Idaho (21 percent), Montana (17.4 percent), and Indiana and Maine, each with15.3 percent gains. There were no states where prices declined.  

This graph shows a comparison of the national year-over-year percent change for the CoreLogic HPI and CoreLogic Case-Shiller Index from 2000 to present month with forecasts one year into the future. We note that both the CoreLogic HPI Single Family Combined tier and the CoreLogic Case-Shiller Index are posting positive, but moderating year-over-year percent changes, and forecasting gains for the next year.

CoreLogic forecasts that its HPI will rise on a month-over-month basis  by 0.5 percent from January to February 2021 and by 3.3 percent for the 12 months ended in January 2022.

While home price changes on the local level vary, January gains across all the top 10 metros surpassed their 2020 levels. Even in metro areas with significant affordability constraints, price gains persist. For instance, home prices in San Diego increased 11 percent over the last year and are forecast to increase an additional 9.6 percent over the next 12 months.

Conversely, The HPI Forecast also reveals the continued disparity in home price growth across metros. In markets like Houston, which was hit hard by the collapse of the oil industry and the recent hurricane season, home prices are expected to decline 0.7 percent by January 2022.