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The CoreLogic Home Price Index (HPI) and HPI Forecast for May 2021 shows the converging pressure of severe inventory shortages and high demand leads home prices to hit record highs.
Home prices increased 15.4% year-over-year in May 2021, the highest year-over-year increase for the month of May since 2005.
Home prices are expected to increase only 3.4% by May 2022, as affordability challenges push more prospective home buyers out of the market. On a month-over-month basis, home prices increased 2.3% compared to April 2021.
Thanks to low borrowing rates, millennials and Gen Z buyers continue to participate through a white hot market, although high prices are likely to deter the number of prospective buyers. First time and low-income buyers are even more likely to be pushed out of the market due to rising prices.
Currently, 82% of borrowers cite housing affordability as a key problem, according to the CoreLogic Survey, and 33% of respondents stated they would wait to buy or not buy at all rather than make sacrifices on their purchase.
Dr. Frank Nothaft, chief economist at CoreLogic, said, “There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent. However, demand and supply imbalances — fueled by a drop in mortgage rates to less than one-half what they were in 2005 and a scarcity of for-sale homes — has fed the latest run up in sales prices.”
For more information about CoreLogic, provider of property insights and solutions, visit www.corelogic.com.