While new contract signings have risen year-over-year in May, home price growth in June is predicted to see stalled growth that would remain throughout the summer, the latest report said.
The CoreLogic HPI Forecast projects a month-over-month decline in home prices of 0.1 percent in June and a 6.6 percent drop year-over-year by May 2021. While the rising activity suggests a rebounding housing market, the forecast decline in the home prices is based on the rise in unemployment, which is now being worsened by the resurgence of COVID-19 cases.
The rise in pending sales and home-purchase applications, which is higher than that of last year, suggests an increase in buying activity of millennials, CoreLogic chief economist, Frank Nothaft said. But he said that home prices in metro areas that have been severely affected by the recession are expected to show declines by the end of summer.
Meanwhile, the Market Risk Indicator (MRI) predicts that Daphne-Fairhope-Foley, Alabama; Prescott, Arizona; Lake Havasu, Arizona; and Naples and Crestview-Fort Walton Beach, Florida are at greater risk or above 60 percent probability of experiencing home price declines over the next 12 months.
National home prices grew by 4.8 percent in May compared to the same period last year and rose 0.7 percent from April 2020.
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CoreLogic president and CEO, Frank Martekk added that despite the recession, home-purchase activity is exceeding expectations as buyers take advantage of record-low interest rates coupled with pent-up demand that was delayed from spring to summer.
For the week ending July 3, 2020, mortgage applications rose 2.2 percent from a week earlier, the Mortgage Banker Association (MBA) Weekly Mortgage Applications Survey as buyers take advantage of record-low mortgage rates.
Purchase application rose five percent, the highest level in almost one month, and rose 33 percent from one year ago. The average size of purchase loans also increased to $365,700.
Refinance activity posted a slight increase of 0.4 percent from the week before, but refinance applications are still 111 percent higher compared to one year ago.
A significant number of realtors seem to agree with the observation, as revealed by the NAR Market Recovery Survey. Thirty-nine percent of respondents who represented buyers said that buyers' timeline was sped up because they were stalled and are now in much need of buying a home.
Moreover, 45 percent of realtors said their market is slowly entering the recovery phase, while 28 percent said their respective markets were hotter than average.
According to the U.S. Bureau of Labor Statistics data, unemployment fell during the past two consecutive months to record an unemployment rate of 11.1 percent in June. That figure represents an improvement from the May unemployment rate of 13.3 percent.
According to the CoreLogic MCI, 39 percent of U.S. metropolitan areas had overvalued housing markets in May 2020, while 24 percent were undervalued. Overvalued markets such as Las Vegas are expected to see a decline in home prices by 20.1 percent by May 2021.
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