Home Prices Rose 6.6% YOY in December

Irvine, CA, February 6, 2018-Home prices nationally increased year over year by 6.6% from December 2016 to December 2017, and on a month-over-month basis home prices increased by 0.5% in December 2017 compared with November 2017, according to the CoreLogic Home Price Index (HPI).

Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 4.3% on a year-over-year basis from December 2017 to December 2018, and on a month-over-month basis home prices are expected to decrease by 0.4% from December 2017 to January 2018.

“The number of homes for sale has remained very low,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Job growth lowered the unemployment rate to 4.1% by year’s end, the lowest level in 17 years. Rising income and consumer confidence has increased the number of prospective homebuyers. The net result of rising demand and limited for-sale inventory is a continued appreciation in home prices.”

According to CoreLogic Market Condition Indicators (MCI) data, an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 35% of metropolitan areas have an overvalued housing market as of December 2017. 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. Also, as of December, 28% of the top 100 metropolitan areas were undervalued and 37% were at value. When looking at only the top 50 markets based on housing stock, 48% were overvalued, 14% were undervalued and 38% were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level.

“Home prices continue to rise as a result of aggressive monetary policy, the economic and jobs recovery and a lack of housing stock. The largest price gains during 2017 were in five Western states: California, Idaho, Nevada, Utah and Washington,” said Frank Martell, president and CEO of CoreLogic. “As home prices and the cost of originating loans rise, affordability continues to erode, making it more challenging for both first time buyers and moderate-income families to buy. At this point, we estimate that more than one-third of the 100 largest metropolitan areas are overvalued.”