Written by Steven Hansen
CoreLogic’s Home Price Index (HPI) shows that home prices in the USA are up 7.1 % year-over-year year-over-year (reported up 1.6 % month-over-month). Last month’s 7.0 % year-over-year gain was revised downward to 6.3 %. CoreLogic HPI is used in the Federal Reserves’ Flow of Funds to calculate the values of residential real estate.
Analyst Opinion of CoreLogic’s HPI
CoreLogic has been revising their data significantly downward in the following month – I would not take the 7.1 % to the bank. However, I would be comfortable suggesting that next month we will discover that the 7.1 % was really 6.4 % (similar to what happened this month). Overall, home price growth trends seem to be marginally trending up – likely do to the low inventory levels of homes for sale.
Dr Frank Nothaft, chief economist for CoreLogic stated:
Home prices posted strong gains in March 2017, and the CoreLogic Home Price Index is only 2.8 percent from its 2006 peak. With a forecasted increase of almost 5 percent over the next 12 months, the index is expected to reach the previous peak during the second half of this year. Prices in more than half the country have already surpassed their previous peaks, and almost 20 percent of metropolitan areas are now at their price peaks. Nationally, price growth has gradually accelerated over the past half-year, while rent growth for single-family rental homes has slowly decelerated over the same period, according to the CoreLogic Single-Family Rental Index, recording a 3 percent rise over the year through March.
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Frank Martell, president and CEO of CoreLogic stated:
A potent mix of strong job gains, household formation, population growth and still-attractive mortgage rates in the face of tight inventories are fueling a continuing surge in home prices across the U.S.. Price gains were broad-based with 90 percent of metropolitan areas posting year-over-year gains. Major metropolitan areas were especially hot with CoreLogic data indicating that four of the largest 10 markets are now overvalued. Geographically, gains were strongest in the West with Washington showing the highest appreciation at almost 13 percent, and Seattle, Tacoma and Bellingham posting gains of 13 to 14 percent.
Comparison of Home Price Indices – Case-Shiller 3 Month Average (blue line, left axis), CoreLogic (green line, left axis) and National Association of Realtors (red line, right axis)
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The way to understand the dynamics of home prices is to watch the direction of the rate of change – and not necessarily whether the prices are getting better or worse. Home price rate of growth is now marginally improving.
Year-over-Year Price Change Home Price Indices – Case-Shiller 3 Month Average (blue bar), CoreLogic (yellow bar) and National Association of Realtors (red bar)
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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
Source: CoreLogic
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