CoreLogic's Home Price Index (HPI) shows home prices rose both year over year and month over month. Home prices increased nationally by 4% from December 2018. On a month-over-month basis, prices increased by 0.3% in December 2019.
.... Price growth is likely to accelerate in 2020. And while demand for homeownership has continued to increase for millennials, particularly those in their 30s, 74% admit they have had to make significant financial sacrifices to afford a home. ....
Analyst Opinion of CoreLogic's HPI
Note the Forecast from CoreLogic on future home price growth:
Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will be 5.2% from December 2019 to December 2020. On a month-over-month basis, the forecast calls for U.S. home prices to increase by 0.1% from December 2019 to January 2020, which would mark a new peak in prices since the last recorded peak in April 2006. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.
According to CoreLogic:
.... revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.
Dr. Frank Nothaft, chief economist at CoreLogic stated:
Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers. Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median
HPI Case-Shiller Trends - Year-over-Year Growth
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From the CoreLogic press release:
According to the CoreLogic Market Condition Indicators (MCI), an analysis of housing values in the country's 100 largest metropolitan areas based on housing stock, 34% of metropolitan areas have an overvalued housing market as of December 2019. The MCI analysis categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals such as disposable income. As of December 2019, 26% of the top 100 metropolitan areas were undervalued, and 40% were at value.
When looking at only the top 50 markets based on housing stock, 40% were overvalued, 20% were undervalued and 40% were at value in December 2019. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% above the long-term, sustainable level. An undervalued housing market is one in which home prices are at least 10% below the sustainable level.
During the second quarter of 2019, CoreLogic, together with RTi Research of Norwalk, Connecticut, conducted an extensive survey measuring consumer-housing sentiment among millennials. The study revealed a significant contrast between younger millennials (ages 21-29) and older millennials (ages 30-38) regarding lifestyle preferences and aspirations for homeownership. Though 79% of younger millennial renters express a desire to purchase a home in the future, very few have previously owned a home, and many do not currently feel the need to own a home. However, due to homeownership rates nearly doubling for millennials once they reach their 30s, many enter a transitional period around 29-30 years old and reconsider their priorities.
Frank Martell, president, and CEO of CoreLogic stated:
On a national level, home prices are on an upswing. Price growth is likely to accelerate in 2020. And while demand for homeownership has continued to increase for millennials, particularly those in their 30s, 74% admit they have had to make significant financial sacrifices to afford a home. This could become an even bigger factor as home prices reach new heights during 2020
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Caveats Relating to Home Price Indices
There is no such thing as an "accurate" home price index. CoreLogic HPI is a repeat sales-type index which should not be skewed by changes in the mix of home sales. For more information, please read: http://www.philadelphiafed.org/research-and-data/publications/research-rap/2014/house-price-indexes.pdf
From CoreLogic:
The CoreLogic HPI™ is built on industry-leading public record, servicing and securities real-estate databases and incorporates more than 40 years of repeat-sales transactions for analyzing home price trends. Generally released on the first Tuesday of each month with an average five-week lag, the CoreLogic HPI is designed to provide an early indication of home price trends by market segment and for the "Single-Family Combined" tier representing the most comprehensive set of properties, including all sales for single-family attached and single-family detached properties. The indexes are fully revised with each release and employ techniques to signal turning points sooner. The CoreLogic HPI provides measures for multiple market segments, referred to as tiers, based on property type, price, time between sales, loan type (conforming vs. non-conforming) and distressed sales. Broad national coverage is available from the national level down to ZIP Code, including non-disclosure states.
CoreLogic HPI Forecasts™ are based on a two-stage, error-correction econometric model that combines the equilibrium home price—as a function of real disposable income per capita—with short-run fluctuations caused by market momentum, mean-reversion, and exogenous economic shocks like changes in the unemployment rate. With a 30-year forecast horizon, CoreLogic HPI Forecasts project CoreLogic HPI levels for two tiers—"Single-Family Combined" (both attached and detached) and "Single-Family Combined Excluding Distressed Sales." As a companion to the CoreLogic HPI Forecasts, Stress-Testing Scenarios align with Comprehensive Capital Analysis and Review (CCAR) national scenarios to project five years of home prices under baseline, adverse and severely adverse scenarios at state, CBSA and ZIP Code levels. The forecast accuracy represents a 95-percent statistical confidence interval with a +/- 2.0 percent margin of error for the index.
Source: CoreLogic
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