- Housing prices experienced their highest surge in the 45-year history of CoreLogic's Home Price Index.
- The data provider cited pandemic factors and higher household formation, and predicted a slowdown in the next year.
- In the meantime, it's bad news for all the millennials who are aging into prime homebuying age.
US home price growth is surging. That's good news for homeowners, bad news for homebuyers, and especially bad news for millennials.
Between October 2020 and October 2021, the average price of an American home went up 18%, according to CoreLogic's Home Price Index, which has been the definitive source for the US housing market for 45 years. That's the biggest increase in those 45 years.
There's reason to believe that the market will be calming down soon, CoreLogic said, highlighting that month-over-month growth slowed to 1.3%, down from its peak of 2.3% in April. This portends a more approachable market in the future for those looking to buy homes. Home price gains are predicted to experience a 2.5% annual increase between October 2021 and October 2022, as financial concerns deter buyers and more houses enter the market.
"New household formation, investor purchases and pandemic-related factors driving demand for the limited supply of available for-sale homes continues to propel the upward spiral of US home prices," CoreLogic CEO Frank Martell said in a statement. "However, we expect home price growth to moderate over the near term as many buyers take a break for the holidays."
The states that experienced the highest home price increases in this period were Arizona, Idaho, and Utah, each seeing surges of more than 24%.
These record price increases are good news for the homeowners on the other side of the equation, however. US homeowner equity increased by 31% in last year's third quarter, adding $3.2 trillion to Americans' wealth, about $56,700 per borrower.
It's bad news for all the younger buyers looking to become homeowners, though. Millennials have had a rough experience with the economy, going through two recessions before their oldest members turned 40, and two housing crises to boot, and now they've become the slowest generation in American history to become homeowners.
But they've been trying to change that this year, despite the surge in housing prices.
Despite historic price growth, younger buyers are still vying for homeownership
Despite the record unaffordability of the housing market, CoreLogic's consumer survey showed that half of respondents in every age bracket said that they want to own homes. The desire is there, even if the market isn't.
In 2021, millennials applied for more mortgages than any other generation. 51% of mortgage applications were submitted by those between the ages of 26 and 41, according to a Corelogic report last month. Factors such as the increased popularity of online home buying and digital-first lending may be responsible, The New York Times reported earlier this year.
Despite the anticipated eventual return to normal, the pandemic is expected to permanently raise the floor for US home prices. In their November housing forecast, economists at Fannie Mae predicted that the median price of a previously owned home will surpass $400,000 by the middle of 2023. The median new home price will hit a record-high of $464,000 by the end of 2023, the firm said, roughly $100,000 higher than it was at the start of 2021.
Younger demographics may be ploughing ahead with homeownership, but the pandemic-era market is the newest in a series of financial obstacles that have plagued millennials since their coming of age.