Home appreciation sluggish but could double by end of year
CoreLogic reported that national home price growth slowed to just 2% year over year in April, but gains (and losses) varied locally.
Key points:
- While home prices have seen limited growth recent months, CoreLogic researchers predict they’ll return to 4% later this year.
- Miami was by far the biggest winner, with home values up by more than 13% annually.
- While Florida has fared well over the past few years, several metros in the state were categorized as being at-risk for price declines.
Like "The Little Engine that Could," the housing market is slowly pushing forward in spite of the forces working against it, and may even start to gain momentum later this year.
According to CoreLogic, home values continue to appreciate, though very modestly. The company has updated its proprietary Home Price Index for the month of April and reported that national single-family home price growth was up just 2% year-over-year — the lowest level since 2012 — and 1.2% month-over-month.
While any increase is likely to be welcomed by existing homeowners, CoreLogic researchers noted that April's increase is the sixth straight month of single-digit gains. And it's certainly a far cry from the nearly 20% annual home price appreciation that CoreLogic recorded in the spring of 2022.
Growth could pick up by the end of the year
Among the factors suppressing home price appreciation, as many experts have noted in recent months, are elevated borrowing costs and low inventory levels, said CoreLogic Chief Economist Selma Hepp. And if the Fed isn't done with rate hikes, the short-term outlook on the market could be more of the same.
"The recent surge in mortgage rates and continued inflation issues suggest that rates may remain elevated, leading home price appreciation to possibly relax this summer and return to average seasonal gains later in 2023," she said.
Despite the lackluster spring, Hepp suggested that annual home price appreciation could push its way back up toward the historical norm of around 4% later this year. By next April, CoreLogic predicts that annual home price appreciation could be upwards of 4.6%. Other economists are split on where home prices may land in the coming months.
Where home prices are up (and down) the most
While prices are up just 2% nationally, local markets vary significantly. Miami posted the biggest gains at 13.2% year over year. Atlanta was a distant second with a 4.8% annual gain, and Houston came in close behind at 4.5%.
The trend is consistent with other data pointing to the South and Southeast as popular destinations for out-of-state buyers and for those trading up.
Markets that have not fared as well include Las Vegas, where home prices are down 4.1%; Phoenix, which recorded a 3.7% drop; and Denver, which saw home prices slide 2.8% in a year. All three markets were some of the hottest places for buyers during the pandemic, which led to huge demand and rapid appreciation between 2020 and early 2022.
CoreLogic also noted there are a handful of markets that are still at risk of home price declines in the next year: Lakeland, Florida; Provo, Utah; Sarasota, Florida; Cape Coral-Fort Myers, Florida; and Port St. Lucie, Florida.
Although Florida has been a hot spot for buyers in recent years, the state is currently experiencing an affordability crisis and a home insurance crisis, which could push some buyers to the sidelines and convince some homeowners to retire elsewhere.