Home prices jumped 7.1 percent annually in May, according to a new report from CoreLogic. File photo courtesy of Wikimedia Commons
July 3 (UPI) -- Home prices jumped 7.1 percent from May 2017 to May 2018 -- the biggest increase in four years, CoreLogic said in a report Tuesday.
In the report, the property information company said price gains had been shrinking slightly as mortgage rates rose. However, higher rates are apparently not hurting demand and are instead exacerbating the already critical supply shortage, the report said.
Home prices will continue to rise over the next year, CoreLogic said, noting the national home-price index is projected to increase by 5.1 percent from May 2018 to May 2019.
"The lean supply of homes for sale is leading to higher sales prices and fewer days on market, and the supply shortage is more acute for entry-level homes," Frank Nothaft, chief economist for CoreLogic, said.
CoreLogic said the long-term desire for home ownership is "much stronger" among renters in markets that have the highest home-price growth.
Over the next 12 months, 41 percent of renters will consider buying, while 11 percent of homeowners are considering selling over that same period, CoreLogic found, adding there would be nearly four times as many renters than homeowners.
"The CoreLogic consumer research demonstrates that, despite high home prices, renters want to get out of their rental property and purchase a home," Frank Martell, president and CEO of CoreLogic, said.
"Even in the most expensive markets, we found four times as many renters looking to buy than homeowners willing to sell. Until more supply becomes available, we will continue to see soaring prices in cities such as Denver, San Francisco and Seattle."
Younger Americans who want to purchase homes may have already delayed buying a house due to the recession and high levels of student debt. Higher rents and higher home prices are the top reasons for the decline in young homeowners.
"Unfortunately, home-price and rent growth above incomes - driven primarily by a severe shortage of housing supply - have been too high of a hurdle for many would-be buyers to clear," Sam Khater, Freddie Mac's chief economist, told CNBC.