National home prices increase rapidly to 5.4% in April
Home prices and the general housing market, like any market, is a balance of supply and demand. That means, conditions are a reflection of how many buyers and sellers there are, rather than the strength or weakness of the overall economy.
For example, when coronavirus mitigation efforts shut down much of the country’s economy, there was a lot of speculation about what would happen to prices. But, though the economy suffered, home prices didn’t.
In fact, they rose. According to the most recent CoreLogic Home Price Index Report, home prices increased 5.4 percent in April over last year at the same time. And, not only did they improve, they did so at a stronger pace than last April, when they were up just 3.6 percent.
So why did home price gains accelerate while the economy was suffering a severe downturn?
Well, it’s pretty simple, actually. When stay-at-home orders went into place, many home sellers pulled their listings and decided to wait a while before selling.
The corresponding drop in for-sale inventory meant there were more home buyers than homes for sale, which led to more competition for available homes, bidding wars, and higher prices.
My thoughts on home prices
Even though the pace of home prices increase is faster than last April year over year, I strongly believe that this is not a tell all sign.
On April 27, 2020, Federal Housing Finance Agency announced that “No Lump Sum Required at the End of Forbearance” for loans secured with Fannie Mae and Freddie Mac.
This was a great news at that time because as people gets back to work and resume their employment, they don’t have to come up with the past missing payments in lump sum. Effectively reducing unimaginable amount of potential foreclosures that industry was worrying about.
Sadly, there are homeowners who will not have a job or their business to go back to. Because of this, there will still be more than usual foreclosure filings in the months ahead, usually 6 months to a year from your notice of default. If homeowner files bankruptcy during foreclosure period, that time frame could be prolonged even further.
Bottom line is, while home prices increasing in April is great news, I believe that it’s superficial to really gouge the housing market for the months ahead and remains to be seen.
What are your thoughts on the housing market in the months ahead?
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