Written by Steven Hansen
CoreLogic’s Home Price Index (HPI) shows home prices improved by 4% year-over-year. As the year-over-year growth did not change, our view is that there is no change in the rate of growth month-over-month.
…. In February, mortgage rates fell to the lowest level in more than three years, which likely will spur additional home shopping activity and price appreciation ….
Analyst Opinion of CoreLogic’s HPI
Note the Forecast from CoreLogic on future home price growth:
Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will be 5.4% from January 2020 to January 2021. On a month-over-month basis, the forecast calls for U.S. home prices to increase by 0.2% from January 2020 to February 2020. 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:
January marked the third consecutive month that annual home price growth accelerated in our national index, as low mortgage rates and rising income supported home sales. In February, mortgage rates fell to the lowest level in more than three years, which likely will spur additional home shopping activity and price appreciation.
HPI Case-Shiller Trends – Year-over-Year Growth
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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, 33% of metropolitan areas have an overvalued housing market as of January 2020. 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 January 2020, 29% 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, 38% were overvalued, 24% were undervalued and 38% were at value in January 2020. 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. While nearly half (44%) of millennials view homebuying as unaffordable, they are generally more optimistic than older generations about housing affordability. However, older generations are less concerned with home prices impacting personal finances and feel more comfortable handling monthly payments than millennials.
Frank Martell, president, and CEO of CoreLogic stated:
Despite a slowdown in home price growth last summer, annual appreciation is beginning to stabilize. While just under half of millennials feel confident they can afford to purchase a home, housing starts have shot up, and mortgage rates have come down, which has helped improve affordability and spur overall housing demand.
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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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