May 2018 CoreLogic Home Prices Up 7.1% Year-Over-Year

CoreLogic's Home Price Index (HPI) shows that home prices in the USA are up 7.1 % year-over-year (reported up 1.1 % month-over-month). CoreLogic HPI is used in the Federal Reserves' Flow of Funds to calculate the values of residential real estate. The quote of the day was in this data release:

.... an increasing number of homeowners keeping the low-rate loans they currently have, rather than sell and buy another home that would carry a higher interest rate ...

Analyst Opinion of CoreLogic's HPI

CoreLogic year-over-year rate of growth has been steady for three years - with a higher number issued initially and later significantly downwardly revised in the following months. This months number will be reduced further in the coming months - and will end up near 6.0 % growth. 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.

Note that CoreLogic forecasts:

The CoreLogic HPI Forecast indicates that home prices will increase by 5.1 percent on a year-over-year basis from May 2018 to May 2019, and on a month-over-month basis home prices are expected to be up 0.3 percent from May 2018 to June 2018.

Dr. Frank Nothaft, chief economist for CoreLogic stated:

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. During the first quarter, we found that about 50 percent of all existing homeowners had a mortgage rate of 3.75 percent or less. May's mortgage rates averaged a seven-year high of 4.6 percent, with an increasing number of homeowners keeping the low-rate loans they currently have, rather than sell and buy another home that would carry a higher interest rate.

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Frank Martell, president, and CEO of CoreLogic stated:

The CoreLogic consumer research demonstrates that, despite high home prices, renters want to get out of their rental property and purchase a home. Even in the most expensive markets, we found four times as many renters looking to buy than home-owners willing to sell. Until more supply becomes available, we will continue to see soaring pprices in cities such as Denver, San Francisco and Seattle.

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.

Frome 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