CoreLogic's latest Home Price Index is reporting this week that U.S. home prices nationwide rose both year over year and month over month in January 2020. Home prices increased nationally by 4% from January 2019. On a month-over-month basis, prices increased by 0.1% in January 2019.
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.
"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," said Dr. Frank Nothaft, chief economist at CoreLogic. "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."
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 of 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.
"Despite a slowdown in home price growth last summer, annual appreciation is beginning to stabilize," said Frank Martell, president and CEO of CoreLogic. "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."