- The economist Selma Hepp says home prices in some areas are rising because of limited inventory.
- Areas that saw price declines during the pandemic are expected to make a comeback, she said.
- Anaheim, California; Seattle; and Sacramento, California; topped the list of Metropolitan areas.
The US housing market started off on a solid footing this year as home prices rose.
But it’s not necessarily because buyers are back in droves. High mortgage rates have kept would-be sellers locked into their current properties, making inventory tight and raising demand for the little that’s on the market, Selma Hepp, the chief economist at CoreLogic, said.
In April, prices for single-family homes rose by 2% year-over-year and 1.2% from the previous month, according to CoreLogic’s Home Price Index. The increase is above the seasonal monthly average, which has historically been at 0.9%, Hepp added.
National home prices are expected to grow 4% this year. But not all markets will fall in line with the average. In fact, there is likely to be a bifurcation in price moves across the US.
The trend is set to follow a reversion back to the mean or a return from pandemic-era migration. In the early days of the lockdowns, some markets saw a rapid appreciation in home prices while others saw double-digit declines, Hepp said.
People moved from expensive West Coast markets and cities to more affordable areas. Now, she said that markets that saw values increase rapidly were leveling out to be more in line with the incomes in those areas.
“When you look long-term, home prices tend to revert back to the rate of growth of income,” Hepp said. “And whenever you have a situation where home-price gains exceed income gains, it’s likely to readjust at some point because if folks can’t afford homes in those markets, then there’s no sales activity. That means home prices decline.”
On the other end, markets that experienced steep price plunges are expected to make a comeback, especially areas that have low inventory, she said.
Below is a list of 51 metropolitan areas expected to see the most home-price increases in the next 12 months, from the highest to the lowest.
The data is taken from CoreLogic’s HPI, which measures the year-over-year changes in single-family-home values based on data from more than 400 US cities. The index changes are based on repeat sales of the same properties.
The metropolitan areas listed below have the highest probability of seeing price declines in the next 12 months.
“In these markets, when we look at how much prices exceed local incomes, it has been substantial. And that increases the vulnerability for price declines going forward,” Hepp said.
The CoreLogic HPI
Finally, while mortgage rates can be difficult to predict, Hepp said that we had likely peaked for the year. CoreLogic expects that mortgage rates will gradually decline for the remainder of the year to about 5.8% if inflation rates continue to decline, she said.
Source: businessinsider.com