Rising rates yet to cool overheated home price appreciation

Double-digit home price growth will slow over the next year, likely decelerating to a 5% pace, CoreLogic said in its May Home Price Index (HPI) forecast.

Despite a surge in interest rates and low housing supply, US home prices in May climbed 1.8% from April and were up 20.2% from a year ago. However, CoreLogic predicts that elevated prices will decline to 5% by May 2023 as rising rates continue to dampen demand.

“With monthly mortgage expenses up about 50% from only a few months ago, fewer buyers are now competing for continually limited inventory. And while annual home price growth still exceeds 20%, we expect to see a rapid deceleration in the rate of growth over the coming year,” said Selma Hepp, deputy chief economist at CoreLogic. “Nevertheless, the normalization of overheated buying conditions should bring about more of a balance between buyers and sellers and a healthier overall housing market.”