The perfect storm of sizzling demand and a stark lack inventory continued to drive home price growth with home price growth hitting recent records by multiple companies’ metrics.
“Frankly, home values are appreciating at rates we’ve simply never seen before, as low interest rates, ultra-scarce inventory and increasingly competitive homebuyers combine to create a truly unprecedented market,” said Ben Graboske, data & analytics president at Black Knight.
That’s not great news for many potential house hunters, especially first-time buyers, low-income households, and millennial/Gen Z hopefuls looking to wade into homeownership thanks to the low mortgage rate environment. A recent CoreLogic survey found that 82% of consumers flagged housing affordability as a key problem, with 33% of respondents saying they would wait to buy or not buy at all rather than make sacrifices on their home purchase.
“First-time buyers are hitting a wall in many places around the country as the pace of home price rises outpace the benefits of lower borrowing costs,” said Frank Martell, president and CEO of CoreLogic. “Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,”
“As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.”
Meanwhile, Graboske observed that rising prices have begun to impact borrower behaviors on both the purchase and refinance sides of the coin.
“Obviously, as home values increase, so do levels of available, tappable equity, which hit an all-time high of $8.1 trillion in Q1,” he said. “In turn, rising equity levels provide homeowners with more refinance options – switching from an FHA to a GSE loan, for example, to both lower a borrower’s interest rate and potentially eliminate mortgage insurance payments at the same time.