Nationally, house prices in July were 5.5% higher than in 2019. This is a marked increase from 4.3% annualized profit in June according to CoreLogic.
Falling mortgage rates helped boost demand from spring, when home sales stalled on the ground due to the onset of the coronovirus epidemic. The popular 30-year average rate also fell below 3% for the first time in July, giving buyers additional purchasing power.
Potential buyers visit an open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters
CoreLogic chief economist Frank Nota said, “Low-priced homes are sought after and their annual growth has accelerated compared to luxury homes.” “First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is particularly in short supply.”
According to the National Association of Realtors, the list of homes priced under $ 100,000 was down 32% year-on-year in July. Compare that to the supply of homes priced at $ 500,000 to $ 750,000, down just 9%.
Of course, all real estate is local, and especially now because the epidemic is hitting some markets harder than others. Homebuying is gaining significant power in more affordable suburban and rural areas as shoppers want more space for the new work-and-school-at-home economy. CoreLogic cited Nassau and Safolk counties on New York’s Long Island, where domestic prices rose by 4.3% each year in July, most likely for urban flight from New York City. Prices in the New York metropolitan area rose just 0.4%.
House prices in San Francisco were less than 1% a year compared to the Washington, DC, metropolitan area, which saw prices soar by up to 5%. There is little flight from the San Francisco to DC area, as tech workers, who can now work from anywhere, leave the latter in search of more affordable homes.
Economists at CoreLogic predict that homes will remain positive in 2021, but profits will weaken, as the initial increase in pandemic buying will occur. In particular, some markets prone to pandemics may suffer the most. Las Vegas and Miami are notable examples because their economy relies heavily on tourism and recreation.
There is also concern that sales of distressed homes will increase as various mortgage bailout programs end. However, given the current housing shortage, the market will absorb these homes quickly, with additional supplies adding some heat to house prices.