US House Prices to Drop 6.6% by May 2021, First Annual Decline since Jan. 2012: CoreLogic, Owner of the Case-Shiller Index

US House Prices to Drop 6.6% by May 2021, First Annual Decline since Jan. 2012: CoreLogic, Owner of the Case-Shiller Index

And this, after years of being unwaveringly bullish in its housing market predictions.

By Wolf Richter for WOLF STREET.

CoreLogic, which owns the Case-Shiller Home Price Index, released its monthly “Home Price Index Forecast” this morning, based on the Case-Shiller data. After years of being bullish about home prices, CoreLogic suddenly turned bearish.

It forecast that prices of single-family houses, including distressed sales, would begin dropping on a month-to-month basis with the June reading – it just released its May reading, which was up 4.8% year-over-year – and that prices, as tracked by the national Home Price Index (HPI), would be down 6.6% year-over-year by May 2021.

“2021 will mark the first year home prices are expected to decline in more than nine years,” CoreLogic said. The last year-over-year decline in the HPI was booked in January 2012.

“Strong home purchase demand in the first quarter of 2020, coupled with tightening supply, has helped prop up home prices through the coronavirus (COVID-19) crisis. However, the anticipated impacts of the recession are beginning to appear across the housing market,” the report said.

The recent surge in pending home sales and in purchase mortgage applications to levels above June last year, supported by record-low mortgage rates, “continues to exceed expectations despite the severe recession,” CoreLogic said in the report (download). This was driven by pent-up buyer demand after the spring season was embroiled in the lockdowns, and spring demand moved into summer.

By the end of summer, under pressure from the unemployment crisis, “buying will slacken and we expect home prices will show declines in metro areas that have been especially hard hit by the recession.”

And by May 2021, the national Home Price Index is expected to be down 6.6% from May this year. All states are “expected to experience a decline.” The CoreLogic Market Risk Indicator predicts that 125 metro areas have at least a 75% probability of price decline by May 2021.

The chart below from the CoreLogic report shows two data sets: The Case-Shiller Index and its forecast through May 2021 (columns); and the CoreLogic HPI (black line) and the HPI Forecast through May 2021 (light-blue line). The Case-Shiller Index, which does not include distressed sales, sees disappearing gains in 2021, but no actual price declines. The HPI Forecast, which does include distressed sales, sees a fairly steep decline roughly in parallel with the first segment of the year-over-year price declines during the housing bust:

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.