U.S. home prices increased 1.1% in May compared with April and were up 7.1% compared with May 2017 – however, rising home prices are not deterring most consumers from wanting to buy, CoreLogic reports.
The software, data and analytics firm is forecasting that home prices will increase 0.3% from May to June and will rise 5.15% during the 12 months ending in May 2019.
“The lean supply of homes for sale is leading to higher sales prices and fewer days on market, and the supply shortage is more acute for entry-level homes,” says Frank Nothaft, chief economist for CoreLogic, in a statement. “During the first quarter, we found that about 50 percent of all existing homeowners had a mortgage rate of 3.75 percent or less. May’s mortgage rates averaged a seven-year high of 4.6 percent, with an increasing number of homeowners keeping the low-rate loans they currently have, rather than sell and buy another home that would carry a higher interest rate.”
CoreLogic’s Market Condition Indicators (MCI), an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, finds that 40% of metropolitan areas had an overvalued housing market as of May.
About 26% of the top 100 metropolitan areas were undervalued and 34% were at value.
When looking at only the top 50 markets based on housing stock, 52% were overvalued, 14% were undervalued and 34% 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. An undervalued housing market is one in which home prices are at least 10% below the sustainable level.
A recent survey conducted by CoreLogic and RTi Research of Norwalk, Conn., shows that 15% of homeowners and 28% of renters have a desire to buy a home in the next 12 months, while only 11% of homeowners indicated a desire to sell.
The survey shows that the long-term desire for homeownership is much stronger among renters in markets that have the highest home-price growth. Lagging supply in these markets is likely to continue as fewer current homeowners are considering putting their homes on the market.
Over the next 12 months, 41% of renters are considering buying while only 11% of homeowners are considering selling over that same period. That is nearly four times as many renters than homeowners, which is the crux of the available housing-supply imbalance.
“The CoreLogic consumer research demonstrates that, despite high home prices, renters want to get out of their rental property and purchase a home,” says Frank Martell, president and CEO of CoreLogic. “Even in the most expensive markets, we found four times as many renters looking to buy than homeowners willing to sell. Until more supply becomes available, we will continue to see soaring prices in cities such as Denver, San Francisco and Seattle.”