Millennials Driving Home Prices; Entry Level Homes See Greatest Gains

Another home price index shows double digit annual price increases, this time for March, and  the CoreLogic HPI also has the highest month-over-month gain we have seen in the present environment. The company says there was an 11.3 percent national rate of appreciation during the month while prices were up 2.0 percent from February. There were no states in which prices declined year-over-year, and those with the highest rates included Idaho (25 percent), Montana (18.8 percent), and Arizona (18 percent).

The company says the 2021 spring homebuying season is on track to outpace trends seen in 2019 and 2018. Millennials are driving the demand, accounting for 54 percent of home purchase applications over the last year. "Older millennials are seeking move-up purchases and younger millennials are entering peak homebuying years. As we look towards the second half of the year, further erosion of affordability may dampen purchase demand as prospective buyers continue to compete for the severely limited supply of for-sale homes. A pick-up in construction and an increase in for-sale listings as more people get vaccinated may help moderate surging home price growth."

Frank Nothaft, CoreLogic's chief economist said, "Lower-priced homes are in big demand and short supply, driving up prices faster compared to their more expensive counterparts. First-time buyers seeking a starter home priced 25 percent or more below the local-area median saw prices jump 15.1 percent during the past year, compared with the overall 11.3 percent gain in our national index."

The CoreLogic HPI Forecast is for gradually slowing rates of growth. Prices are expected to increase between March and April 2021 by 1.1 percent and drop to 3.5 percent by March 2022.

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 0.5 percent over the next year. Conversely, San Diego saw prices grow 14 percent over the last year and are projected to see additional appreciation of 12.5 percent by March 2022.