Written by Steven Hansen
CoreLogic’s Home Price Index (HPI) shows that home prices in the USA are up 6.8 % year-over-year year-over-year (reported up 0.7 % month-over-month). CoreLogic HPI is used in the Federal Reserves’ Flow of Funds to calculate the values of residential real estate. The quote of the day was in this data release:
…. One-third of millennial renters reported feeling they cannot afford a down payment to buy a home …
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. This months number will be reduced further in the coming months – and will end up near 6.0 % growth. 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.
Note that CoreLogic forecasts:
Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 5.1 percent on a year-over-year basis from June 2018 to June 2019.
Dr Frank Nothaft, chief economist for CoreLogic stated:
The rise in home prices and interest rates over the past year have eroded affordability and are beginning to slow existing home sales in some markets. For June, we found in CoreLogic public records data that home sales in the San Francisco Bay Area and Southern California were down 9 and 12 percent, respectively, from one year earlier. Further increases in home prices and mortgage rates over the next year will likely dampen sales and home-price growth.
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Frank Martell, president and CEO of CoreLogic stated:
One-third of millennial renters reported feeling they cannot afford a down payment to buy a home. With home prices rising quickly over the past few years and supplies low, first-time homebuyers face ever-growing challenges to find and buy affordable entry-level homes. More needs to be done to help our first-time buyers join the homeownership class.
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
Frome 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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