September 2019 CoreLogic Home Prices Increased by 3.5% Year Over Year

CoreLogic's Home Price Index (HPI) shows home prices rose both year-over-year and month-over-month. Home prices increased nationally by 3.5% from September 2018. On a month-over-month basis, prices increased by 0.4% in September 2019.

.... Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership ....

Analyst Opinion of CoreLogic's HPI

Note that CoreLogic forecasts:

Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will increase 5.6% by September 2020. On a month-over-month basis, the forecast calls for home prices to increase by 0.3% from September 2019 to October 2019. 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:

Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership. In addition to lower interest rates, personal income grew faster than home prices during the past year. This provided an additional lift for first-time buyer affordability and helped to boost the homeownership rate to the highest level in more than five years.

HPI Case-Shiller Trends - Year-over-Year Growth

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, 36% of metropolitan areas have an overvalued housing market as of September 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 September 2019, 23% of the top 100 metropolitan areas were undervalued, and 41% were at value.

When looking at only the top 50 markets based on housing stock, 40% were overvalued, 16% were undervalued and 44% were at value in September 2019, unchanged from August 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 survey revealed that millennials are not particularly confident with their personal finances — nor the U.S. economy — compared to older generations. But, contrary to this lack of confidence, one in five millennials perceive buying a home as affordable, which is more optimistic compared to their older counterparts. Still, 42% of older millennials (30-38) said they spent more on their home purchase than expected, with new home buyers in this demographic spending an average of $383,000 on a home. This may be a factor that has caused initial down payments to be sourced from savings. In fact, the average home buyer in this cohort put a 16% down payment on their home, with nearly half of those funds coming from a 401(k) or retirement account.

Frank Martell, president, and CEO of CoreLogic stated:

All 50 states posted positive home price trends in September with the average price nationally rising 3.5%. As a group, more millennials are entering the home-buying market and they report spending more money than they anticipated. This may impact their future financial planning. Millennials age 30-38 put down less than 20% for a down payment over the past three years and used funds from their retirement accounts to cover an average of 7% of that down payment.

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