The economy is in free fall, unemployment is skyrocketing, and more than 100,000 small businesses have closed forever due to coronavirus woes.

Meanwhile, home prices are continuing to accelerate.

According to a new report, prices continued to rise in April, reaching their highest annual growth rate since August 2018.  The U.S. CoreLogic Home Price Index was up 1.4% from March and 5.4% from a year earlier, with gains in all states.

Compared to last year, home purchase activity slowed down in March and April. However, millennials looking to take advantage of low interest rates helped to keep things moving.

Meanwhile, the low inventory of homes, especially lower-priced ones, propped up prices. Nationally, the for-sale stock of entry-level homes plummeted an average of 25% in April.

“The very low inventory of homes for sale, coupled with homebuyers’ spur of record-low mortgage rates, will likely continue to support home price growth during the spring,” said CoreLogic Chief Economist Dr. Frank Nothaft in a press release.

One reason for the lack of inventory is the fact that more homeowners are staying put, said Odeta Kushi, deputy chief economist at First American.

“Since the Great Recession, tenure has rapidly increased from approximately seven years to currently more than 12 years, the highest it has ever been,” she said. “Increasing tenure means existing homeowners, who supply the overwhelming majority of homes for sale, are not selling, which limits supply.”

Prior to the pandemic, rising tenure length was driven by two trends: Existing homeowners were locking in historically low mortgage rates, and older homeowners were choosing to age in place. Now a third factor has emerged — pandemic-driven economic uncertainty and health risk concerns associated with showing homes to buyers.

“As more homeowners were reluctant to list their homes for sale amid the pandemic, the supply of homes available to potential homebuyers dwindled further,” Kushi said. “You can’t buy what’s not for sale.”

While home price growth is expected to decelerate somewhat in May, with CoreLogic predicting a small month-over-month increase of 0.3%, the true economic effects of the recession won’t be felt for some time.

Although many forecasts have so far predicted prices remaining strong or even increasing in the long run, CoreLogic is now projecting the first decline in values in nine years to begin in 2021.

“If unemployment remains elevated in early 2021, then we can expect home prices to soften,” Nothaft said. “Our forecast has home prices down in 12 months across 41 states.”

Areas hit by downturns in tourism and oil and gas are expected to experience the largest home price declines.

According to the CoreLogic Market Condition Indicators, an analysis of housing values in the country’s 50 largest metropolitan areas based on housing stock, 40% of metropolitan areas had an overvalued housing market in April 2020, while 18% were undervalued and 42% were at value. 

The report called Houston’s housing market “overvalued,” forecasting a 4.3% decline in home prices by April 2021.

“Tight supply and pent-up demand, particularly among millennials, provides optimism for a bounce-back in the housing market purchase activity and home prices over the medium term,” said Frank Martell, president and CEO of CoreLogic. “The next 12 to 18 months are going to be very tough times for the broader economy. As employment and economic activity begin to pick up, as it will surely do, we expect housing to be a driver in a national recovery.”