House prices defy expectations in 2020 – they more than doubled from 2019 – but are expected to rise much more slowly in 2021, CoreLogic said.
The December CoreLogic Home Price Index saw values rise 9.2% in 2020. This is the highest annual change in the index since February 2014.
The year-on-year change for December 2019 compared to 2018 was 4%. This comes from a CoreLogic report from February 2020, which also predicted that prices will be 5.2% higher annually last December.
In fact, with the outlook for the property market in March and April bleak due to the impact of the pandemic on economic activity, it even seemed difficult to achieve growth. CoreLogic's HPI report for March 2020 forecast modest price growth of 0.5% over the next 12 months.
"At the start of the pandemic, many were preparing for a real estate market collapse during the Great Recession," said Frank Martell, President and CEO of CoreLogic, in a press release this week. "However, the market conditions leading into the crisis – namely the low supply of homes, the desire for more space and millennial demand – have reinforced the rapid acceleration in home prices."
The average annual monthly change in CoreLogic HPI in 2020 was 5.7% compared to 3.8% in 2019.
Although the home sales environment is set to be strong in 2021 – as indicated by the Mortgage Bankers Association's forecast for a record year in the rise of home purchases – CoreLogic predicts prices will only rise 2.9% through next December .
And it is this strong market that could hold back price gains.
"Two record lows are driving home prices up: inventory for sale and mortgage interest. Potential sellers with flexible schedules have chosen to postpone listing their home until the pandemic fades or they are vaccinated," said Frank Nothaft, chief economist at CoreLogic. "We can assume that more inventory will be available in the second half of the year, which will lead to a slowdown in price growth towards the end of the year."
Until the inventory shortage is addressed, affordability concerns could emerge, causing some buyers to be ousted from the market, CoreLogic said.