Written by Steven Hansen
CoreLogic’s Home Price Index (HPI) home prices for December 2020 exceeded expectations in 2020, closing out the year with the highest annual home price gain since February 2014 in December at 9.2%. CoreLogic said:
…. Two record lows are fueling home price gains: for-sale inventory and mortgage rates ….
Analyst Opinion of CoreLogic’s HPI
Price growth exceeded my forecast for the year – home prices are continuing very strong.
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:
Two record lows are fueling home price gains: for-sale inventory and mortgage rates. Prospective sellers with flexible timetables have opted to delay listing their home until the pandemic fades or they are vaccinated. We can expect more inventory to come available in the second half of the year, leading to slowing in price growth toward year-end.
HPI Case-Shiller Trends – Year-over-Year Growth
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Frank Martell, president and CEO of CoreLogic stated:
At the start of the pandemic, many braced for a Great Recession-era collapse of the housing market. However, market conditions leading into the crisis — namely low home supply, desire for more space and millennial demand — amplified the rapid acceleration of home prices
Affordability concerns continue to persist as prices continue to steeply rise. For instance, in San Diego, prices increased 10.4% year over year in December 2020 compared to the 3% gain December 2019. San Diego home prices are also forecasted to increase an additional 8.2% over the next 12 months.
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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 that 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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