Written by Steven Hansen
CoreLogic’s Home Price Index (HPI) shows that home prices in the USA are up 6.6 % year-over-year year-over-year (reported up 0.5 % month-over-month). 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 year-over-year rate of growth has been steady for three years – with a higher number issued initially and later significantly downwardly revised in the following months. Last month it was 6.9 % year-over-year – which was revised down to 6.4 %. This likely will be reduced further in the coming months – and will end up near 6 % growth.
Dr Frank Nothaft, chief economist for CoreLogic stated:
The number of homes for sale has remained very low. Job growth lowered the unemployment rate to 4.1 percent by year’s end, the lowest level in 17 years. Rising income and consumer confidence has increased the number of prospective homebuyers. The net result of rising demand and limited for-sale inventory is a continued appreciation in home prices.
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Frank Martell, president and CEO of CoreLogic stated:
Home prices continue to rise as a result of aggressive monetary policy, the economic and jobs recovery and a lack of housing stock. The largest price gains during 2017 were in five Western states: California, Idaho, Nevada, Utah and Washington. As home prices and the cost of originating loans rise, affordability continues to erode, making it more challenging for both first time buyers and moderate-income families to buy. At this point, we estimate that more than one-third of the 100 largest metropolitan areas are overvalued.
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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