Home prices across the nation climbed 18.5% year-over-year in December, according to a monthly report published by CoreLogic. On a month-over-month basis, home price gains rose by 1.3% in December 2021 compared to November.
Consumer desire for homeownership paired with a low supply of for-sale homes were the main contributors to a red-hot housing market in 2021.
However, the data vendor said that the market is beginning shift. Mainly, that home price gains, which are predicted to start 2022 above 10%, will slow to 3.5% by December 2022.
In other words, the market and home price appreciation will start to normalize.
“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,” said Frank Nothaft, chief economist at CoreLogic.
Mortgage rates have already started to climb upwards, with Freddie Mac‘s PPMS Mortgage Survey clocking the average 30-year fixed rate mortgage at 3.55% during the week ending Jan. 27.
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The perfect storm of supply and demand pressures in 2021 pushed price appreciation to an average of 15% for the full year, up from the 2020 full year average of 6%.
The reason for supply pressures in 2021 in part stemmed from supply-chain delays and the skyrocketing of lumber costs, delaying the building of new houses.
A report published by Redfin this week found that overall inventory dropped to a record low in December, with just 1.8 months of supply.
Meanwhile, last month, Naples, Florida, logged the highest year-over-year home price increases at 37.6%, while in Punta Gorda, Florida, home prices grew by 35.7%, CoreLogic’s report found.
On a state-by-state basis, the Southern, Southwest and Mountain West regions dominated the top three spots for national home price growth last year, with Arizona ranking first place at 28.4%.
Florida ranked second with 27.1% home price growth and Utah came in third at 25.2%, the report said.