HOUSTON – (By Dale King, Realty News Report) – Houstonians who’ve had to don facemasks, been forced to isolate themselves at home, lost jobs and seen the price of Texas crude oil crash through the floor are about to endure another swipe of COVID-19-instigated fallout: A drop in home prices.
CoreLogic, the global property information firm, has released its latest Home Price Index and HPI Forecast which outlines a rough road for the American home sales arena for at least the coming 10 months.
The HPI Forecast points to virus-weary annual price growth of just 0.5% in the residential housing market from March 2020 to March 2021 – down significantly from the 5.4% price gain forecast in January. The month-over-month increase will ring in at a struggling 0.6% between March and April 2020, the report adds.
But Houston faces an even tougher year ahead. The CoreLogic report for the Bayou City sees home prices following oil’s lead – and dropping.
“In overvalued markets like Houston, where the recent oil and gas industry is in turmoil, home prices are expected to decline by 2.6%,” the report predicts.
This is indicative, the HPI forecast says, of the increased disparity of home prices across various metros and highlights the continued housing affordability crisis, which began well before COVID-19 and promises to deepen in the looming recession.
An early indicator for the Houston market may be the average list price of homes placed on the market in April. The Houston Association of Realtors reported the average price of a new listing in April was $320,503, down 0.6 percent from the $322,327 average list price in April of 2019.
Even with some transactions interrupted before Gov. Greg Abbott designated real estate as an “essential” service statewide in his March 31 stay-at-home order, Houston home sales were more than 11% ahead of the levels at this point in 2019. Consumers were still taking advantage of historically low mortgage interest rates through the first half of the month, prior to the heavy impact of the coronavirus.
“The short-term effects of the economic fallout from COVID-19 are already being felt (notably, rapid declines in home buying activity),” CoreLogic reported.
Still, the firm’s experts remain confident, they say, that foundations, including strong engagement from price growth, will keep the average home price above sea level – up 0.5% by March 2021.
“Home prices for March reflect transactions negotiated primarily in the previous two months, prior to the implementation of the shelter-in-place policies,” said Frank Nothaft, chief economist at CoreLogic.
“The rapid decline of purchase activity starting in the middle of March can be seen in other CoreLogic data and is consistent with our HPI forecast of slowing price growth in April.”
He noted that “first quarter GDP results showed that the country entered a recession in March. Unemployment claims have reached record highs and this economic environment will further impact the housing market into the foreseeable future.”
Before COVID-19, a booming economy and increased wages had many home buyers taking advantage of low rates and choosing to purchase larger detached options, which pushed home prices up almost a full 1% over smaller condo or duplex options, the report says.
CoreLogic’s President and CEO Frank Martell managed to find a spark of light in the COVID-19 darkness. He said he feels that the young buyers will eventually pull the home market out of the quagmire.
“Although the economic fallout from lockdown orders, put in place to fight the spread of COVID-19, will be profound, the basic supports for a rebound in home purchase activity remain in place. Once the shelter-in-place policies are lifted, we expect millennials, who submitted home-purchase applications well into the crisis, to lead the way back to a positive, purchase-driven housing cycle.”
As in Houston, another overvalued market – Miami – is expected to see single-family combined home prices decrease by 1.9% by March 2021, CoreLogic reported.