The U.S. housing market surprised economists by rallying in the midst of a pandemic. But the coronavirus may drag down home values after all.
Prices will fall about 6.6% in the year through May 2021, the first annual decline since 2012, as the economic damage from the pandemic deepens, according to a forecast by CoreLogic Inc.
That’s a stark shift from the path the market has been on recently, as record-low mortgage rates spur purchases and tight supplies push up prices. The momentum is unlikely to hold with persistently high unemployment that may worsen as increasing cases of the virus force some state governments to delay or scale back their reopening plans.
“By the end of summer, buying will slacken and we expect home prices will show declines in metro areas that have been especially hard hit by the recession,” CoreLogic Chief Economist Frank Nothaft said in a report Tuesday.
Prices nationwide had climbed 4.8% in 12 months through this past May, the firm said.
There’s at least a 75% chance of price declines in 125 metro areas by next May, led by getaway destinations in states such as Arizona and Florida that “faced the perfect storm of elevated Covid-19 cases and the subsequent collapse of the spring and summer tourism market,” according to the report. The last annual decline was in January 2012, at -0.3%.
The news is worse for the country’s casino capital. Prices in Las Vegas will plunge 20.1% as a plunge in tourism combines with values that were inflated before the pandemic, according to CoreLogic.
The firm projected declines of 11.7% in Boston, 9% in Denver, 7.4% in Houston, 6.3% in Los Angeles and 5.9% in New York.