It’s almost sounding like a broken record at this point, but U.S. home prices continued their steady climb in June — and, combined with rising interest rates, the trend is prompting more and more people to stay in their homes instead of selling.
Nationwide home prices rose 6.8% during the year ended June, according to the most recent data update from real estate analysis firm CoreLogic, with a 0.7% bump from May of this year. The usual suspects led the way in price growth: The Las Vegas metropolitan area saw the greatest jump at 12.9%, followed closely by the red-hot San Francisco market at 11.2% and Denver at 8.1%. Boston led East Coast cities with an 8.0% gain.
Frank Nothaft, the company’s chief economist, said rising interest rates have compounded the affordability problem for many buyers, as the supply of homes for sale on the market continues to shrink.
“For June, we found in CoreLogic public records data that home sales in the San Francisco Bay Area and Southern California were down 9 and 12 percent, respectively, from one year earlier,” Nothaft observed in the report. “Further increases in home prices and mortgage rates over the next year will likely dampen sales and home-price growth.”
These trends have conspired to freeze out younger millennial homebuyers — those born between 1980 and 1995 — from the process, as the double whammy of price increases and seniors staying in place boost competition for an evaporating pool of available properties.
“One-third of millennial renters reported feeling they cannot afford a down payment to buy a home,” CoreLogic CEO Frank Martell said in the report. “With home prices rising quickly over the past few years and supplies low, first-time homebuyers face ever-growing challenges to find and buy affordable entry-level homes.”
But there’s also a potential for the trend to move in the opposite direction: Last month, researchers from George Mason University pointed out that many older homeowners in the Washington, D.C. metro area were living in properties with multiple empty bedrooms and warned that a sudden baby boomer change from keepers to sellers could wreak havoc on local-level housing markets.
“The significant number of older homeowners in larger homes means that even a modest shift in preferences could have an outsized impact on the housing market,” . “If even three percent of homeowners aged 50+ with two or more extra bedrooms decided to sell, an additional 8,210 homes would be put on the market — the equivalent of 12.4% of all the homes sold in the Near-In Washington region in 2017.”
The CoreLogic report also included one word of warning: In June, 54% of the top 50 housing markets were “overvalued,” defined as having home prices that run 10% higher than “the long-term, sustainable level.” By comparison, just 14% were undervalued.