The CoreLogic (NYSE: CLGX) Home Price Index (HPI™) and HPI Forecast™ for October 2018, out Tuesday, show home prices rose both year over year and month over month.
Home prices increased nationally by 5.4% year over year from October 2017. On a month-over-month basis, prices increased by 0.5% in October 2018.
Looking ahead, the CoreLogic HPI Forecast indicates home prices will increase by 4.8% on a year-over-year basis from October 2018 to October 2019. On a month-over-month basis, home prices are expected to decrease by 0.7% from October to November 2018.
“Rising prices and interest rates have reduced home buyer activity and led to a gradual slowing in appreciation,” said Dr. Frank Nothaft, chief economist for CoreLogic. “October’s mortgage rates were the highest in seven and a half years, eroding buyer affordability. Despite higher interest rates, many renters view a home purchase as a way to build wealth through home-equity growth, especially in areas where rents are rising quickly. These include the Phoenix, Las Vegas and Orlando metro areas, where the CoreLogic Single-Family Rent Index rose 6% or more during the last 12 months.”
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, 35% of metropolitan areas have an overvalued housing market as of October 2018. 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). Additionally, as of October 2018, 24% 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, 44% were overvalued, 16% were undervalued, and 40% were at value. 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.
In 2018, CoreLogic together with RTi Research of Norwalk, Connecticut, conducted a consumer housing sentiment study, combining consumer and property insights. The study assessed attitudes toward homeownership and the drivers of the home buying or renting decision-making process. When asked about the important aspects of homeownership, owners cited “a place to feel safe” as very important and said that having something to call their own was the most important factor. Additionally, both renters and owners felt a home is an investment and a place to raise a family and counted those factors among the top reasons to own a home.
“Homeownership remains an important part of the American dream,” said Frank Martell, president and CEO of CoreLogic. “Our research found that being a homeowner makes consumers feel safe in their homes. Renters really want something to call their own. However, until affordability comes back into balance, renters will have a hard time purchasing a home.”
