Please consider the CoreLogic US Home Price Insights for April 2023.

CoreLogic HPI™ is designed to provide an early indication of home price trends. The indexes are fully revised with each release and employ techniques to signal turning points sooner.

CoreLogic HPI Forecasts™ (with a 30-year forecast horizon), project CoreLogic HPI levels for two tiers—Single-Family Combined (both Attached and Detached) and Single-Family Combined excluding distressed sales.

February 2023 National Home Prices

Home prices nationwide, including distressed sales, increased year over year by 4.4% in February 2023 compared with February 2022. On a month-over-month basis, home prices increased by 0.8 % in February 2023 compared with January 2023

The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.2% from February 2023 to March 2023 and increase on a year-over-year basis by 3.7% from February 2023 to February 2024.

Forecasts

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. 

The forecast accuracy represents a 95% statistical confidence interval with a +/- 2% margin of error for the index.

CoreLogic Year-Over-Year Measure Change

Rent, OER, Case-Shiller Percent Change From Year Ago

CPI, Rent, OER from BLS, Case-Shiller Data from St. Louis Fed

OER stands for Owners' Equivalent Rent, a measure of what one would pay to rent one's own house from oneself, unfurnished, without utilities.

HPI vs Case-Shiller Year-Over-Year Comparison

• CoreLogic HPI: 4.4 Percent
• Case-Shiller National: 3.8 Percent
• Case-Shiller 20-Metros: 2.5 Percent 

Since Case-Shiller and CoreLogic both use similar logic on repeat sales, the year-over-year numbers should be close, and they are. 

Case-Shiller Trends

Housing peaked summer of 2022 nationally, generally June or July, but Miami and Chicago in August. 

Case-Shiller Home Price Index

Is the CoreLogic Forecast Silly?

I think so. 

• The Fed has tightened significantly. 
• The 30-year mortgage rate is currently 6.37 percent, up from 3.0 in June of 2021.
• Home prices have barely begun to decline. 
• Affordability is in the gutter.
• The economy is weakening if not already in recession. 

A 10 or even 15 percent decline over the next year would not surprise me in the least. Alternatively, I would be surprised by any increase at all.

What Would It Take For CoreLogic to Be Correct?

I think it would take rate cuts by the Fed, lower inflation, much lower mortgage rates, no recession, and even bigger asset bubbles. 

That's not impossible but what odds do you want to assign to such a scenario?

I suggest there is perhaps a 10 percent chance of prices rising by about 4 percent a year from now.

The catch is the Fed is leaning against asset bubbles and inflation.

If rates crash, it will be due to recession and asset bubble deflation. Home prices are highly unlikely to buck that trend.

Economy Weakening Fast 

On April 3, I noted Baseline GDPNow Forecast Drops 50 Percent Since March 23, But Final Sales Still Strong

Today I noted Factory Orders Unexpectedly Much Weaker Than Expected With Big Negative Revisions

Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

Real Gross Domestic Product (GDP) and Real Gross Domestic Income (GDI) 2022 Q4

Income estimates were off by a mile and the BEA revised key components of fourth-quarter GDP much lower.

For discussion, please see Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

Home Prices Are Falling Everywhere, But Not as Fast as They Rose

On April 1, I noted Home Prices Are Falling Everywhere, But Not as Fast as They Rose

There is no reason to expect a reversal of the current trend and every reason to expect declines will continue. 

Forget this East vs West home price reporting with prices allegedly rising in the East but falling in the West. 

A recession will send home prices lower across the board. 

The Risk is Deflation

Finally, please consider MishTalk Video, What's the Real Risk Now, Is it Inflation or Deflation?

Given the obvious inflationary forces, that may seem like a silly question, but let's take a closer look in a video discussion.

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