US home prices will fall 6.6% over the next year as COVID-19's fallout worsens, report says

• US home prices are set to fall 6.6% over the next year as the fallout from the coronavirus pandemic worsens, CoreLogic said in a Tuesday report.
• The group said its home-price index increased 4.8% in the 12 months through May, supported by strong demand, especially from younger buyers, and low supply.
• "While activity up until now suggests the housing market will eventually bounce back, the forecasted decline in home prices will largely be due to elevated unemployment rates," the report said. "This prediction is exacerbated by the recent spike in COVID-19 cases across the country."
• Read more on Business Insider.

US home prices are set to fall over the next year as the coronavirus pandemic continues to slam the economy, according to a Tuesday report from CoreLogic.

The group predicted that its home-price index would slump as much as 6.6% in the 12 months through May 2021, which would mark the first annual decline since February 2012, as the market grapples with the pandemic recession that began in February.

So far, housing has fared well in the coronavirus pandemic. The group's index increased 4.8% in the 12 months through May, supported by strong demand, especially from younger buyers, and low supply, the report said.

"While activity up until now suggests the housing market will eventually bounce back, the forecasted decline in home prices will largely be due to elevated unemployment rates," the CoreLogic report said. "This prediction is exacerbated by the recent spike in COVID-19 cases across the country."

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New daily coronavirus cases have hit record highs in some states in recent weeks, in some cases leading governments to pause or roll back plans to reopen their economies.

In June, the US economy added a record 4.8 million payrolls, suggesting that a labor-market recovery is underway. Still, the data reflected the early weeks of the month, before spikes in COVID-19 cases threatened reopenings.

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"The anticipated impacts of the recession are beginning to appear across the housing market," CoreLogic said. "Despite new contract signings rising year over year in May, home price growth is expected to stall in June and remain that way throughout the summer."

The pandemic recession has had the biggest effect on local housing markets, according to the report. CoreLogic found that there was a 75% chance of price declines in 125 metro areas in the next year.

The hardest-hit areas include states like Florida and Arizona that "faced the perfect storm of elevated COVID-19 cases and the subsequent collapse of the spring and summer tourism market," CoreLogic said.

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