Home Prices Predicted to Decrease in the Next Year

Home Price Index Highlights: April 2020

By Molly Boesel Housing Affordability, Real Estate

  • National home prices increased 5.4% year over year in April.
  • Home prices are forecast to decrease by 1.3% from April 2020 to April 2021.

National home prices increased 5.4% year over year in April 2020, according to the latest CoreLogic Home Price Index (HPI®) Report. The April 2020 HPI gain was up from the April 2019 gain of 3.6%. This acceleration in home price growth could be the result of a decrease in housing supply in response to the pandemic. The economic downturn that started in March 2020 is predicted to cause a 1.3% drop in the HPI by April 2020, which would be the first decrease in home prices in over 9 years.

The HPI has increased on a year-over-year basis every month since February 2012 and has gained 68.2% since hitting bottom in March 2011. As of April 2020, the overall HPI was 13.3% higher than its pre-crisis peak in April 2006, just before the start of the 2007 financial crisis. Due to a decrease in the inflation index, the HPI adjusted for inflation was higher than the unadjusted HPI – adjusted for inflation, U.S. home prices increased 6.1% year over year in April 2020 and were 6.9% below their 2006 peak[1]. Figure 1 shows the cumulative price movement since the inception of the 2006 price declines for both the nominal HPI and the inflation-adjusted HPI, as well as the time in years since the first decrease in the indices.

Figure 1: HPI Price Declines From Peak

CoreLogic analyzes four individual home-price tiers that are calculated relative to the median national home sale price[2]. The lowest price tier increased 7.7% year over year in April 2020, compared with 6.7% for the low- to middle-price tier, 5.9% for the middle- to moderate-price tier, and 4.8% for the high-price tier. The lowest price tier showed the fastest acceleration in prices in April from a year earlier. Cumulative price gains since the 2011 trough were strongest for lower-priced homes, with the lowest price tier gaining 106.6%, the low- to middle-price tier gaining 84.6%, the middle- to moderate-price tier gaining 71.5% and the high-price tier gaining 54%. Figure 2 shows the change from a year ago and from the 2011 trough for each HPI price tier.

Figure 2: Price Growth Strongest For Lowest-Priced Homes

Figure 3 shows the year-over-year HPI growth in April 2020 for the 5 highest- and lowest-appreciating states. Idaho led the states in appreciation as it has since late 2018, with annual appreciation of 12% this April, far above any of the other leading states. At the low end, Alaska saw appreciation of 1%. Prices in 43 states (including the District of Columbia) have risen above their nominal pre-crisis peaks. Connecticut home prices in April 2020 were the farthest below their all-time HPI high, still 15.8% below the July 2006 peak.  While annual price increases slowed in 15 states compared with a year earlier, the cooling was most pronounced in Nevada. Prices in Nevada increased by 5.4% year over year in April 2020, a 2-percentage point slowdown from the 7.5% annual increase recorded in April 2019.

Figure 3: States With the Highest and Lowest Year-Over-Year Change in HPI

© 2020 CoreLogic, Inc. All rights reserved

[1] The Consumer Price Index (CPI) Less Shelter was used to create the inflation-adjusted HPI.

[2] The four price tiers are based on the median sale price and are as follows: homes priced at 75% or less of the median (low price), homes priced between 75% and 100% of the median (low-to-middle price), homes priced between 100% and 125% of the median (middle-to-moderate price) and homes priced greater than 125% of the median (high price).