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posted on 03 December 2019

October 2019 CoreLogic Home Price Growth Remains 3.5% Year Over Year

Written by Steven Hansen

CoreLogic's Home Price Index (HPI) shows home prices rose both year-over-year and month-over-month. Home prices increased nationally by 3.5% from September 2018. On a month-over-month basis, prices increased by 0.5% in October 2019.

.... We expect home prices to rise at least another 5% over the next 12 months ....

Analyst Opinion of CoreLogic's HPI

Note that CoreLogic forecasts:

Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will increase by 5.4% from October 2019 to October 2020. On a month-over-month basis, the forecast calls for home prices to increase by 0.2% from October 2019 to November 2019. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

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.

Dr. Frank Nothaft, chief economist at CoreLogic stated:

Local home-price growth can deviate widely from the change in our U.S. index. While we saw prices up 3.5% nationally last year, home prices also declined in 22 metropolitan areas. Price softness occurred in some high-cost urban areas and in metros with weak employment growth during the past year.

HPI Case-Shiller Trends - Year-over-Year Growth

z corelogic2.PNG

From the CoreLogic press release:

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 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. As of October 2019, 27% of the top 100 metropolitan areas were undervalued, and 38% were at value.

When looking at only the top 50 markets based on housing stock, 40% were overvalued, 20% were undervalued and 40% were at value in October 2019. 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.

During the second quarter of 2019, CoreLogic, together with RTi Research of Norwalk, Connecticut, conducted an extensive survey measuring consumer-housing sentiment among millennials. The survey showed that millennials are mostly unconcerned about qualifying for a mortgage. Three out of four millennials, or 75%, say they are confident they would qualify for a loan with their current financial situation. Still, despite this confidence, more than half of the cohort cites buying a home as a stressful experience, noting spending the majority of their savings as one of the leading stressors.

Frank Martell, president, and CEO of CoreLogic stated:

Nationally, over the past year, home prices are up 3.5% with the rate of growth accelerating from September into October. We expect home prices to rise at least another 5% over the next 12 months. Interestingly, this persistent increase in home prices isn't deterring older millennials. In fact, 25% of those surveyed anticipate purchasing a home over the next six to eight months.

z corelogic5.PNG

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: http://www.philadelphiafed.org/research-and-data/publications/research-rap/2014/house-price-indexes.pdf

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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