While home price appreciation lost momentum compared to the year before, tight inventory and the low interest rate environment could spur a competitive spring purchase season, driving values upward.
Price appreciation rose 4% year-over-year in January and increased just 0.1% month-over-month, according to CoreLogic's Home Price Index. Though the annual gain fell from 4.4% the year before, 5.4% growth is expected for January 2021.
January 2020 marked the 19th month in a row of annual price growth below 6%. Anticipated growth for February should be only 0.2%, depending on how much the recent emergency rate cut does to boost housing activity and how much the coronavirus does to quell it.
"January marked the third consecutive month that annual home price growth accelerated in our national index, as low mortgage rates and rising income supported home sales," Frank Nothaft, chief economist at CoreLogic, said in a press release. "In February, mortgage rates fell to the lowest level in more than three years, which likely will spur additional home shopping activity and price appreciation."
In the largest 100 metropolitan statistical areas in the nation by housing stock, 33% of homes were overvalued in January, while 29% were undervalued and 38% were at value. When cut down to the top 50 largest MSAs, 38% were overvalued, just 24% were undervalued and 38% were at value.
At the state level, Idaho was ahead of the curve with a 10.5% annual price growth, followed by 9.3% in South Dakota, 7.6% in Missouri and 7.5% in Maine.
"Despite a slowdown in home price growth last summer, annual appreciation is beginning to stabilize," said Frank Martell, president and CEO of CoreLogic. "While just under half of millennials feel confident they can afford to purchase a home, housing starts have shot up, and mortgage rates have come down, which has helped improve affordability and spur overall housing demand."
