We’ve all been hearing a lot about home prices holding up despite the pandemic. While this is true of the overall housing market, we see a very different picture the closer we look.
While many markets will hold value or even appreciate in the year ahead many will not. Our forecast predicts ten states will see home price declines in the next year:
At Home Value Forecast we believe real estate trends are local, and what is going on at the CBSA or ZIP or neighborhood level can be dramatically different than the national or state average. For example, if we go down to the CBSA level we see a different story.
A CBSA (core-based statistical area) is a U.S. geographic area consisting of one or more counties anchored by an urban center of at least 10,000 people that are socioeconomically tied to the urban center by commuting. Of the 731 CBSAs we track, 314 or 43% of the total are forecasted to decline over the next year, with some forecasting over a 20% decline.
Want to go more granular? At the ZIP codes level, 49% (6,007) of the ZIPs we track are forecasted to decline over the next 12 months.
Unemployment numbers and mortgage rates have the most impact on home price forecasts, with an increase in either negatively impacting appreciation. The unprecedented unemployment numbers brought on by COVID-19 in the last several months haven’t been seen since 1918.
Several factors are offsetting the full negative impact of these unemployment numbers on home values, including low interest rates, low inventory, current home equity, tightened credit policy, GSE forbearance and the belief that there will be more mortgage modifications and fewer defaults than in the 2008 crisis.
During the last crisis, the housing industry was the catalyst to the crash, this time it may be the engine to the recovery. Lessons learned in 2008 have and will make a difference. Not all markets will escape the negative impact of the economy but the $6 Trillion in home equity gains over the last decade and historically low interest rates give many of those unable to make mortgage payments alternative options to foreclosure.
ABOUT HOME VALUE FORECAST
Home Value Forecast (HVF) provides insight into the current and future state of the U.S. housing market.
The Home Price Index (HPI) used in this report is built using numerous data sources including public records, local market MLS and general economic data. Data for the top CBSAs and ZIP codes are available with a corporate subscription to the service. To learn more, please Contact Us.