CoreLogic® (NYSE:CLGX), Irvine on Tuesday released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for July 2018, which show home prices rose both year over year and month over month.
Home prices increased nationally by 6.2% year over year from July 2017 to July 2018. On a month-over-month basis, prices increased by 0.3% in July 2018 compared with June 2018.
Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 5.1% on a year-over-year basis from July 2018 to July 2019. On a month-over-month basis, home prices are expected to decrease by 0.2% from July to August 2018.
“With increased interest rates and home prices, the CoreLogic Home Price Index is rising at a slower rate than it was earlier this year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “While markets in the western part of the country continue to experience rapid home-price growth, many of those metros are overvalued, and will likely experience a slowdown soon.”
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, 40% of metropolitan areas have an overvalued housing market as of July 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 July 2018, 20% of the top 100 metropolitan areas were undervalued, and 40% were at value. When looking at only the top 50 markets based on housing stock, 50% were overvalued, 12% were undervalued and 38% were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% higher than 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 an extensive 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 process. The July CoreLogic Market Condition Indicators (MCI) data reveals that 50% of the top 50 markets are considered overvalued. However, residents in many of these high-price growth markets have expectations that might be at odds with this reality. 62% of residents in these markets expect their homes will be worth more in three years than they are today. Meanwhile, 55% of residents in no/negative growth markets believe their homes will be worth either the same or less in three years than they are today. Additionally, 47% of residents in high-price growth markets and 31% in lower growth markets feel they are in a “sellers’ market.”
“Many consumers see their homes as good investments,” said Frank Martell, president and CEO of CoreLogic. “Our consumer research indicates homeowners, especially those in high-price growth markets, are confident that by waiting to sell, they will receive a greater return on investment than they would today. In other words, sellers are largely staying put. With fewer homes on the market, price pressure will continue to rise.”
