According to CoreLogic, the value of homes is currently at its highest point within a 45-year time frame, particularly the value for homes with solar panels. While this development is great news for homeowners or landlords, it’s bad news for those on the other side of the market. CoreLogic’s House Value Index stated that the average value of a home in America increased by 18% between October 2020 – October 2021.
CoreLogic’s Take on the Housing Market
There’s been speculation that the housing market is just in a bullish phase and that things will soon quiet down. Signs are already pointing to this; the month-over-month progression has decreased from 2.3% to 1.3%. This can mean that in some years from now, the housing market will be more pocket-friendly for buyers than it is currently. There has also been speculation that the value of homes will go up by 2.5%, beginning from October 2021 till October 2022, according to CoreLogic home price index.
Factors triggering this bullish phase in the housing market include investor purchases, new household formation, and pandemic-affiliated factors pushing the demand for the insufficient availability of buildings on the market. According to Frank Martell, the CEO of CoreLogic, prices are expected to decrease in the near future because several buyers will take a short break from the market.
Further data from CoreLogic stated that states like Idaho, Arizona, and Utah witnessed the biggest surge in home value. Each of these states witnessed an increase in price beyond 24%.
The Effect of Rising Home Values on HomeOwners and Homebuyers
This increase in price favors homeowners because it significantly enhances their equity. For example, homeowners equity rose by 31% in the third quarter of 2021 alone in the U.S. In figures, this translates to an injection of $3.2 trillion to America’s economy.
On the other hand, this is not good news for intending homeowners, particularly the younger ones (the millennials). Within the last four decades, millennials have witnessed two of the worst periods in the American economy (2 recessions and a housing crisis). This has significantly contributed to making their acquisition of homes the slowest in the country’s history.
Despite the unfavorable house prices, the current generation of intending homeowners is still striving to acquire homes. According to CoreLogic’s consumer survey, 50% of respondents in all age brackets claimed that they desire to be homeowners. In essence, the willingness is there despite the hostile state of the housing market.
2021 has witnessed a lot of applications for mortgage loans by millennials. CoreLogic reported that individuals within the age bracket of 26-41 years submitted 51% of the total mortgage loan applications in November. Factors that triggered this surge in mortgage applications include digital-first loans and digital home buying.
More Speculation on the Housing Market
Though there is an expected return of home prices to normal, the covid-19 pandemic is speculated to push the value of homes further. During the November housing forecast, Fannie Mae’s economists speculated that the average value of a previously occupied home would exceed $400k by mid-2023.
Fannie Mae also speculated that the average value for new homes will probably peak at $464k towards the end of 2023, which is an increase of about $100k from their price in the first quarter of 2021.