Written by Steven Hansen
CoreLogic’s Home Price Index (HPI) shows that home prices in the USA are up 3.6 % year-over-year (reported up 0.9 % 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:
…. buyers feel that high prices are forcing them to spend more than they’d expect on a home ….
Analyst Opinion of CoreLogic’s HPI
Last month the stated year-over-year increase was published 3.6 % – which makes this month unchanged year-over-.year. Note that CoreLogic forecasts:
After several months of moderation earlier this year, the CoreLogic HPI Forecast indicates home prices will increase by 5.6% from May 2019 to May 2020. On a month-over-month basis, home prices are expected to increase by 0.8% from May 2019 to June 2019, bringing single-family home prices to an all-time high. 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:
Interest rates on fixed-rate mortgages fell by nearly one percentage point between November 2018 and this May. This has been a shot-in-the-arm for home sales. Sales gained momentum in May and annual home-price growth accelerated for the first time since March 2018.
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Frank Martell, president, and CEO of CoreLogic stated:
The recent and forecasted acceleration in home prices is a good and bad thing at the same time. Higher prices and a lack of affordable homes are two of the most challenging issues in housing today, and every buyer, seller and industry participant is being impacted. The long-term solution lies in expanding supply, which will require aggressive and effective collaboration between policy makers, state and local government entities and home builders.
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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
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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