CoreLogic's latest Home Price Index and HPI Forecast for July 2019 shows U.S. home prices rose both year over year and month over month. Home prices increased nationally by 3.6% from June 2018. On a month-over-month basis, prices increased by 0.5% in July 2019.
Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will increase by 5.4% by July 2020. On a month-over-month basis, the forecast calls for home prices to increase by 0.4% from July 2019 to August 2019. 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.
"Sales of new and existing homes this July were up from a year ago, supported by low mortgage rates and rising family income," said Dr. Frank Nothaft, chief economist at CoreLogic. "With the for-sale inventory remaining low in many markets, the pick-up in buying has nudged price growth up. If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year."
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, 37% of metropolitan areas have an overvalued housing market as of July 2019. 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 of June 2019, 23% of the top 100 metropolitan areas were undervalued, and 40% were at value.
When looking at only the top 50 markets based on housing stock, 40% were overvalued, 16% were undervalued and 44% were at value. 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. The survey found that approximately 26% of this age cohort expressed an interest in buying a home in the next 12 months, but only 8% indicated a desire to sell their home within the same time frame. This means that new housing starts, or sellers from other age cohorts, will need to make up the necessary available housing stock to meet the demand. This desire to buy while housing stock is limited will continue to force prices up as buyers search for a home to purchase.
"A growing number of millennials are expressing an interest in buying homes, reinforcing the theory that this cohort is continuing to engage within the housing market," said Frank Martell, president and CEO of CoreLogic. "But, with so few homes available for sale, the imbalance has created an affordability crisis that is getting worse every day. Demand exceeds supply and we're unsure of when the two will balance out."