- The latest US home inflation report shows prices still surging, but offered welcome news for buyers.
- Prices rose 18.1% year-over-year in August,
CoreLogic said Tuesday - the fastest growth in at least 45 years. - Yet month-over-month growth was just 1.3%, a huge slowdown from July, meaning the annual price gains are misleading about the state of the market.
Depending on how you read the data, it's either the most extreme seller's housing market in roughly 50 years or a space that's turning the corner for homebuyers.
On one hand,
But on a monthly basis, price growth is definitely cooling off after surging through most of the year. Prices rose 1.3% month-over-month through August, slowing sharply from the 1.8% jump in July. Other home-price indexes showed inflation easing in July. The latest CoreLogic data suggests that slowdown isn't a one-off, and instead continued through the end of summer.
The latter perspective comes at a critical time for prospective buyers. Months of record-breaking price growth pulled Americans' homebuying attitudes to dismal lows. Just 29% of surveyed adults said it was a good time to buy a home in September, according to the University of Michigan's Surveys of Consumers. That's the smallest share since 1982, and underscores just how hellish homebuying has been in 2021.
How the market got into this predicament is simple. The pandemic sparked a wave of moves as Americans looked to capitalize on record-low borrowing costs and the new freedom to work remotely. Home sales skyrocketed just months into lockdowns. But decades of underbuilding quickly got in the way of the buying spree. Home supply plunged to historic lows, and the scarcity of available houses drove prices higher at a dizzying pace.
Price inflation is starting to ease up, but the market remains far from normal. August's 1.3% gain is still much larger than the sub-1% monthly gains seen through much of the past decade. The persistent mismatch between home demand and market supply also hints at more extraordinary growth to come.
"We expect to see the trend of strong price gains continue indefinitely with large amounts of capital chasing too few assets," Frank Martell, president and CEO of CoreLogic, said in a statement.
That's not to say the price rally will last forever. CoreLogic expects inflation to slow quickly into 2022, a forecast shared by several other economists. The company sees monthly price gains hitting pre-crisis levels by the end of next year.
Even CoreLogic's near-term outlook calls for a continued cooldown. The firm sees prices rising just 0.3% from August to September. Home prices are also expected to climb just 2.2% from August 2021 to August 2022, according to the Tuesday report. That would be the slowest rate of home-price inflation since 2012.
The estimates also ignore the potential for some major government intervention. President Joe Biden has already unveiled a series of regulatory changes that aim to create 100,000 new homes around the country. Congressional Democrats are now looking to add another 2 million homes to the US supply with their $3.5 trillion spending package.
Whether the construction drive comes to fruition remains to be seen. The multitrillion-dollar plan is expected to shrink to roughly $2 trillion to win moderate Senate Democrats' support, and the $213 billion allocated for housing could easily be cut down.
But some aid is still better than none at all. Buyers, then, can remark at the wild year-over-year price growth, while appreciating that the worst inflation is probably behind them.