CoreLogic revealed that U.S. home prices increased by 18.1% year over year in November, according to its latest Home Price Index (HPI) report. This large annualized jump, which was up from 8.1% in November 2020, marks the largest 12-month gain since CoreLogic began tracking the metric in 1976.
From October to November of last year, home prices increased by 1.3%. As it has been for much of the past year, price growth was during the month was stoked by low mortgage rates, robust demand and short supply of for-sale properties, with the latter factor exacerbated of late due to heightened activity from investors.
Every home-price tier saw price gains remain at a high level, with prices at the lowest tier increasing by 19.8% year over year while prices in the low and middle tiers were up 19%. At the middle and moderate price tiers, prices rose 19.1% during the year while prices at the highest tier grew by 18.6%.
Expectations of rising interest rates (the Federal Reserved recently projected three hikes to its baseline rate in 2022) should moderate demand in the months ahead. Coupled with anticipated growth of for-sale inventory, this should slow home-price gains over the course of the year at the cost of weakening affordability, said CoreLogic chief economist Frank Nothaft.
“Interest rates on 30-year fixed-rate mortgages averaged a record low of 2.96% during 2021, helping to keep monthly payments low in the face of record-high home prices,” Nothaft said. “However, the Federal Reserve appears poised to allow interest rates to rise in 2022. Higher rates will intensify buyer affordability challenges, especially in overvalued local markets.”
CoreLogic’s HPI forecast anticipated short-term price gains to remain flat between November and December. The long-term prognosis is a much more muted year-over-year increase of 2.8% from November 2021 to December 2022. While that’s far below the inflated price surges that have become the market norm of late, market participants can still expected a healthy year ahead, said Frank Martell, CoreLogic’s president and CEO.
“Over the past year, we have seen one of the most robust seller’s markets in a generation,” Martell said. “While increased interest rates may help cool down homebuying activity, we expect 2022 to be another strong year with continuing upward price growth.”
