It is increasingly clear that the science, or perhaps it is an art, of home price forecasting could use some work. One year ago, in its report on November 2020 home prices, CoreLogic projected that the 7.5 percent annual appreciation reflected in those numbers would slow to 2.5 percent by November 2021. The results are in, and those November prices were up 18.1 percent year-over-year.
Not beating up on CoreLogic. This has been a tough year to anticipate anything in the housing market and others have failed as well. During the National Association of Realtors December 2020 Real Estate Forecast Summit, the consensus of 23 economists was for prices to rise 8.0 percent last year. It was a 10-point miss. A pandemic, supply chain issues, soaring prices for building lots and materials, record low inventories; Nostradamus would be befuddled. Still, one wonders why analysts go so far out with their projections. Props for their courage.
The 18.1 percent increase in November is actually a slight acceleration from than annual growth in September and October. CoreLogic put the increase at 18 percent in both months. The month-over-month change in November was 1.3 percent, identical to the September to October number.
The company notes that 2021 was a record breaker for home price growth and, “for many prospective buyers the hot housing market will continue to exacerbate ongoing affordability challenges into the new year — and beyond.”
The prices of detached residential properties were up 19.4 percent. This was 5.8 percentage points higher than the 13.6 percent annual appreciation of attached properties.
Though home price growth remains at historic highs, it is projected to slow over the next year. However, economic growth and inflation will most likely lead to increases in mortgage rates, which will further erode affordability.
“Interest rates on 30-year fixed-rate mortgages averaged a record low of 2.96 percent during 2021, helping to keep monthly payments low in the face of record-high home prices,” said Dr. Frank Nothaft, chief economist at CoreLogic. “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.”
"Over the past year, we have seen one of the most robust seller's markets in a generation,” said Frank Martell, president and CEO of CoreLogic. “While increased interest rates may help cool down homebuying activity, we expect 2022 to be another strong year with continuing upward price growth."
CoreLogic projects that the rate of price gains will decelerate to 2.8 percent by November 2022.
Naples, Florida, logged the highest year-over-year home price increase at 36.7 percent followed by Twin Falls, Idaho, at 33.3 percent. At the state level Arizona led with 28.6 percent growth. Florida ranked second place with a 25.8 percent growth, pushing Idaho from second to third place at 25.5 percent.