Home prices increased nationally by 4% year over year in February and 0.7% from January, CoreLogic® (NYSE: CLGX) reported Tuesday.
The company also said home-price growth is trending slower in 2019 than during the same time period in 2018.
Looking ahead, after some initial moderation in early 2019, the CoreLogic HPI Forecast indicates home prices will begin to pick up and increase by 4.7% on a year-over-year basis from February 2019 to February 2020. On a month-over-month basis, home prices are expected to decrease by 0.5% from February 2019 to March 2019.
“During the first two months of the year, home-price growth continued to decelerate,” said Dr. Frank Nothaft, chief economist for CoreLogic. “This is the opposite of what we saw the last two years when price growth accelerated early. With the Federal Reserve’s announcement to keep short-term interest rates where they are for the rest of the year, we expect mortgage rates to remain low and be a boost for the spring buying season. A strong buying season could lead to a pickup in home-price growth later this year.”
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 February 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). Additionally, as of February 2019, 27 percent of the top 100 metropolitan areas were undervalued, and 38 percent were at value.
When looking at only the top 50 markets based on housing stock, 40% were overvalued, 18% were undervalued and 42% were at value in February 2019. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10 percent 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 first quarter of 2019, CoreLogic together with RTi Research of Norwalk, Connecticut, conducted an extensive survey measuring consumer-housing sentiment in high-priced markets. In all, 62% of residents in high-priced markets acknowledged that housing in these markets was unaffordable, compared to only 11% of respondents across all markets surveyed last year. Nearly three quarters of renters (71%) in these high-priced markets felt their housing costs were unaffordable, compared to just 16% of renters across all markets last year. High-priced markets were identified as the 15 metropolitan areas with the highest median home prices. The study focused on the dynamics of housing decision making and the impact that the housing market had on the attitudes and perceptions of residents in high-priced markets.
“About 40% of the top 50 largest metropolitan areas in the country are now categorized as overvalued and we expect that percentage to grow over the remainder of 2019. The cost of either buying or renting in expensive markets puts a significant strain on most consumers,” said Frank Martell, president and CEO of CoreLogic. “Our research tells us that about 74% of millennials, the single largest cohort of home buyers, now report having to cut back on other categories of spending to afford their housing costs.”
