Home prices were seeing even bigger gains in January than all of last year, but that was before the coronavirus hit the U.S., shutting down much of the economy and the housing market. Now there are forecasts that home values will weaken significantly.
Nationally, home prices rose 3.9% annually, up from 3.7% in December, according to the S&P CoreLogic Case-Shiller Indices. The 10-City Composite showed an increase of 2.6%, up from 2.3% in the previous month. The 20-City Composite posted a 3.1% annual gain, up from 2.8% in the previous month.
Phoenix, Seattle and Tampa continued to lead with the highest annual gains among the 20 cities. In January, Phoenix prices were up 6.9% year-over-year, and Seattle and Tampa each saw prices up 5.1%. Fourteen of the 20 cities reported larger annual price gains.
"As has been the case since mid-2019, after a long period of decelerating price increases, the National, 10-City, and 20-City Composites all rose at a faster rate in January than they had done in December," Craig J. Lazzara, managing director and global head of Index Investment Strategy at S&P Dow Jones Indices, wrote in a release. "Housing prices were particularly strong in the West and South, and comparatively weak in the Midwest and Northeast."
Lazzara did make a point to note that all of this data is pre-coronavirus impacts and does not reflect any of the slowdown in both the economy and the housing market. While he did not make any predictions, others say home prices could fall nationally for the first time since the recession.
"We expect a peak-to-trough fall in prices of around 4% by early 2021, with values then flattening out for the rest of the year," wrote Matthew Pointon, an economist with Capital Economics. "Housing demand will see a sharp decline as unemployment hits record highs, and households are prevented from buying a home due to the shut down of large parts of the economy."
Pointon says the risk to housing will rise, so buyers' willingness to pay for a home will fall, and house price expectations will take a hit.