Annual US home prices showed steady growth in February prior to the coronavirus outbreak.
Nationwide, the CoreLogic Home Price Index (HPI) was up by 4.1% year over year and up 0.6% month over month. CoreLogic expects home prices will continue to rise at a 0.5% pace from February to March.
“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 CoreLogic Chief Economist Frank Nothaft. “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.”
However, shifts in the housing market during the pandemic led to a slowdown in purchase activity in the latter half of March as unemployment started to increase, and local stay-in-place orders resulted in cancellations of open houses.
Of 100 US metropolitan areas, 33% have an overvalued housing market, according to CoreLogic's Market Condition Indicators (MCI), an analysis of housing values in 100 metros based on housing inventory.
Meanwhile, 38% were at value, and 29% were undervalued as of February. The MCI defines an overvalued market as one in which home prices are at least 10% above the long-term, sustainable level, while home prices in an undervalued market are at least 10% below the sustainable level.
“The nearly 10-year-old recovery of the US housing market has run headlong into the panic and uncertainty from the global COVID-19 pandemic,” said Frank Martell, president and CEO of CoreLogic. “In terms of home value trends, we are in uncharted territory as we battle the outbreak with measures that are generating a never-before-seen, rapid downshift in economic activity and employment. We expect that many homeowners will initially be somewhat cushioned by government programs, ultra-low interest rates, or have adequate reserves to weather the storm. Over the second half of the year, we predict unemployment and other factors will become more pronounced, which will apply additional pressure on housing activity in the medium term.”