CoreLogic's Home Price Index (HPI) home prices for September 2020. Nationally, home prices increased 6.7% in September 2020, compared with September 2019, marking the fastest annual acceleration since May 2014.
.... COVID has contributed to the acute shortage of inventory as the pace of new construction slowed and older prospective sellers postponed listing their homes until after the pandemic ....
Analyst Opinion of CoreLogic's HPI
This is a rear view of home prices. There are several likely scenarios:
- Home prices will deteriorate as the year progresses as the knock-on effect of the coronavirus will grow. The worst-case will be a decline to Great Recession levels but the most likely scenario is a 10% decline roughly equal to the expected unemployment rate. Too much money is being removed from the economy due to the COVID restrictions and elevated unemployment.
- There will be a great relocation spurred by the continuation of working from home [why live in an expensive location if you can live anywhere in the world you want].
- Some combination of above
Note the Forecast from CoreLogic on future home price growth:
Looking forward, the HPI Forecast shows national home price increases slowing to 0.2% over the next 12 months as eroding affordability and increased for-sale inventory moderates appreciation. However, should the economic recovery be more robust, then we would expect projections for home price performance to improve.
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.
Home-purchase demand maintained pace in the late summer compared to previous years, as record-low mortgage rates continue to motivate prospective homebuyers, including first-time buyers and homeowners looking to trade-up or invest in a second home. However, according to the National Association of Realtors and U.S. Census Bureau, the national supply of homes for sale fell to the lowest recorded level in September at 40% of that seen in September 2008 and 75% of that seen in September 2000. This severe inventory shortage has intensified upward pressure on home price appreciation as consumers compete for the limited number of homes on the market.
Dr. Frank Nothaft, chief economist at CoreLogic stated:
COVID has contributed to the acute shortage of inventory as the pace of new construction slowed and older prospective sellers postponed listing their homes until after the pandemic. Once the pandemic passes or a vaccine is widely administered, we should see a noticeable pick-up in for-sale homes. And if the economy's recovery is sluggish next year, distressed sales may also add to market inventory.
HPI Case-Shiller Trends - Year-over-Year Growth
Despite the rapid acceleration of national home price growth, local markets continue to vary. For instance, in Phoenix, where there is a severe shortage of for-sale homes, prices increased 11.1% in September. Meanwhile, the New York-Jersey City-White Plains metro recorded only a small annual increase in home prices of 0.3%, as residents opt for more space and privacy in less densely populated areas. By state, Idaho, Arizona, and Maine experienced the strongest price growth in August, up 11.8%, 11%, and 11%, respectively.
From Frank Martell, president and CEO of CoreLogic:
Housing continues to be a bright spot during an otherwise challenging economic time for many U.S. households. Those in sectors that weathered the transition to remote work successfully are now able to take advantage of low mortgage rates to purchase a home for the first time or to trade-up to a larger home.
Looking forward, the HPI Forecast shows national home price increases slowing to 0.2% over the next 12 months as eroding affordability and increased for-sale inventory moderates appreciation. However, should the economic recovery be more robust, then we would expect projections for home price performance to improve.
The HPI Forecast also reveals the disparity in expected home price growth across metros. In markets like Las Vegas, where the local tourism economy and job market continue to struggle, home prices are expected to decline 5.6% by September 2021. Conversely, in San Diego, home prices are forecasted to increase 5.7% over the next 12 months as low inventory continues to push prices up.
The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that metros such as Las Vegas and Miami — areas that have been hard hit by the collapse of the tourism market — are at the greatest risk (above 70%) of a decline in home prices over the next 12 months. Other metro areas with a high risk of price declines include Lake Charles, Louisiana; Springfield, Massachusetts and Prescott, Arizona.
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 here.
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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