Home prices are expected to increase an average of just 1.9 percent across the United States through the first quarter of 2021 due to massive unemployment and other economic impacts associated with the coronavirus pandemic.
Five cities in Illinois – led by Chicago – are expected to be among the bottom top performing markets, according to the projections released by Veros Real Estate Solutions.
“Home price trends and forecasts certainly take a backseat to more pressing health and safety issues during this unprecedented tragedy. While we expect a softening of house prices in the near-term, we anticipate a rebound when the COVID-19 pandemic subsides,” said Darius Bozorgi, CEO of Veros Real Estate Solutions. “The fundamental economic principles under which housing has been operating in recent years are solid. Real estate prices will be poised to recover when we see employment return across the nation.”
Meanwhile, CoreLogic reported Thursday that home prices for February increased 4.1 percent over February 2019.
“Before the onset of the pandemic, the quickening of home price growth during the first two months of 2020 highlighted the strength of purchase activity,” said Dr. Frank Nothaft, chief economist at CoreLogic. “In February, the national unemployment rate matched a 50-year low, mortgage rates fell to the lowest level in more than three years and for-sale inventory remained lean, all contributing to the pickup in value growth.”
That will undoubtedly change, however.
Over the next year, Veros is calling for 10 percent of all markets to depreciate – up from a forecast of just 1 percent last quarter. Previously, Veros had forecast 3.9 percent home price growth across the country through the end of 2020.
|Metropolitan Statistical Area||Depreciation Q1 2020-2021|
|Baton Rouge, Louisiana||-2.3 %|
|Bridgeport, Stamford, Norwalk, CT||-1.5%|
|New Haven, CT||-0.8%|
Given the causes of the expected recession (pandemic versus risky lending or other underlying economic turmoil), Veros does not yet expect dramatic decreases in home prices long term.
“Right now, we see economic variables at odds across the country,” said Eric Fox, Veros Vice President of Statistical and Economic Modeling. “On one hand, we have historically low interest rates that typically stimulate demand and increased prices. On the other hand, unemployment is rising rapidly and GDP is falling quickly, which normally drives house prices down. Finally, we have many people who have taken their homes off the market, reducing supply, and many buyers sitting on the sidelines temporarily, reducing demand. This reduced demand/supply scenario isn’t really pushing prices up or down. The combination of all of these factors results in mild forecast depreciation on average for the next quarter with a return to normal appreciation rates later in the year and into 2021.”
Versos said the 10 strongest markets over the next year are expected to be:
|Metropolitan Statistical Area||Appreciation Q1 2020-2021|
|Boise City-Nampa, ID||7.6%|
|Idaho Falls, ID||6.3%|
|Sierra Vista, AZ||5.8%|
|Colorado Springs, CO||4.9%|