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Home prices increased an average of 15% on an annual basis in 2021 according to the latest report from CoreLogic. Prices started the year with 10% growth in the first quarter and ended the fourth quarter with an 18% gain. In 2020, the average appreciation was 6.0%.
The company forecasts that home prices will increase this year, but not as quickly as last year. They currently expect 10% growth at the beginning of the year falling steadily to 4.5% by December. The average annual growth is predicted to be 9.6%.
"Much of what we’ve seen in the run-up of home prices over the last year has been the result of a perfect storm of supply and demand pressures,” according to Frank Nothaft, chief economist at CoreLogic. “As we move further into 2022, economic factors–such as new home building and a rise in mortgage rates–are in motion to help relieve some of this pressure and steadily temper the rapid home price acceleration seen in 2021.”
The 2021 price growth has proven a bonanza for those homeowners who were willing or able to sell. A year-end report from ATTOM says sellers realized a median profit of $94,092, a 45.3% rate of return (ROI) last year, up from $65,931 and 33.6% in 2020. The 12-percentage point increase in ROI was the largest annual gain since 2013. Profits rose in 90% of the 173 markets tracked by the company.
Not only did profits rise, but they also arrived faster. Average homeowner tenure fell to 6.14 years in the fourth quarter. This was down slightly from a year earlier, but homeowners lived in their homes almost two years less before selling in 2021 than those who moved on in 2019.
Inventory Level to Improve?
The number of existing homes available in December fell below one million, enough for only a 1.8-month supply at the current sales rate. NAR chief economist Lawrence Yun said the current diminished home inventory offers consumers very few options. In addition, he said, the steady increase in interest rates over the last several weeks will ultimately push marginal buyers to the sidelines.
Yun does expect inventory to improve however, largely due to new home construction. He predicts that housing starts will rise to 1.65 million this year compared to 1.595 million starts in 2021. Call or email us to find out about selling your home while inventory is still low and demand high or buying or refinancing while rates are still historically low.
