Biggest price gain since November 2005
According to CoreLogic's latest CoreLogic Home Price Index, converging pressures of severe inventory shortages and sustained demand pushed home prices to record highs in May 2021, with the year-over-year increase in home prices at its highest level since 2005.
While many millennials and Gen Z home buyers continue to move into the hot market thanks to low borrowing rates, high prices are likely deterring increasing numbers of prospective buyers -- especially first-time and low-income families.
Currently, 82% of consumers note housing affordability as a key problem, according to a recent CoreLogic survey. Additionally, 33% of respondents noted they would wait to buy or not buy at all rather than make sacrifices on their purchase.
"First-time buyers are hitting a wall in many places around the country as the pace of home price rises outpace the benefits of lower borrowing costs. Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves," said Frank Martell, president and CEO of CoreLogic. "As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year."
"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," said Dr. Frank Nothaft, chief economist at CoreLogic. "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."
Top Home Price Index Takeaways: