Home Prices Grew 18.5% In 2021, Should Cool In 2022

Home prices rose year-over-year (YOY) by 18.5% across the nation in December 2021, and by 1.3% from November, CoreLogic’s latest Home Price Index reported.

Home price growth averaged 15% for 2021, which saw one of the hottest housing markets in decades. Q1 2021 started off with 10% appreciation but continued to grow, reaching 18% in Q4.

By comparison, price appreciation for the full year of 2020 averaged only 6%.

The states with the highest increases YOY were Arizona (28.4%), Florida (27.1%), and Utah (25.2%). The cities with the biggest gains were Phoenix (30.2%), Las Vegas (24.4%), and San Diego (22.4%).

CoreLogic predicts that home prices will remain flat this month and rise by only 3.5% by next December. Comparing annual changes in its HPI and Case-Shiller Index from 2000 to now, the report projects that home prices will continue to grow but moderate over the next year.

“Much of what we’ve seen in the run-up of home prices over the last year has been the result of a perfect storm of supply and demand pressures,”  said CoreLogic Chief Economist Dr. Frank Nothaft.

“As we move further into 2022, economic factors – such as new home building and a rise in mortgage rates – are in motion to help relieve some of this pressure and steadily temper the rapid home price acceleration seen in 2021.”

Builders have scrambled to keep up with demand this year, resulting in December seeing the largest share ever of newly-built homes for sale. New construction accounted for 34.1% of single-family homes at the end of 2021, up from 25.4% in December 2020.

The report addressed growing concern over a housing bubble, which has spawned numerous opinion pieces in the media as of late. A Redfin survey found that 77% of homebuyers and sellers believe there’s a housing price bubble in the area where they live.

However, the report stresses that CoreLogic’s Market Risk Indicators point to a very small probability of nationwide price decline. 

Instead, specific markets are likely to see price drops while prices nationally continue growing, but at a more moderate pace. Metros such as Prescott, Arizona; Merced, California; Lake Havasu-Kingman, Arizona; and Worcester, Massachusetts, have a more than 70% chance of home price depreciation over the next twelve months.