U.S. home prices increased year over year by 6.7% from June 2016 to June 2017, and on a month-over-month basis, home prices increased by 1.1% in June 2017 compared with May 2017, according to CoreLogic’s home price index (HPI) report.
Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 5.2% on a year-over-year basis from June 2017 to June 2018, and on a month-over-month basis, home prices are expected to increase by 0.6% from June 2017 to July 2017.
“The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory,” says Frank Nothaft, chief economist for CoreLogic. “As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years.”
Of the nation’s 10 largest metropolitan areas measured by population, four were overvalued in June, according to CoreLogic Market Conditions Indicators (MCI) data. These four metros include Denver-Aurora-Lakewood, Colo.; Houston-The Woodlands-Sugar Land, Texas; Miami-Miami Beach-Kendall, Fla.; and Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.
By comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals, such as disposable income, the MCI categorizes home prices in individual markets as undervalued, at value or overvalued, CoreLogic explains. Because most homeowners use their income to pay for home mortgages, there is an established relationship between income levels and home prices.
The MCI defines an overvalued market as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued market is one in which home prices are at least 10% below the sustainable level.
“Home prices are marching ever higher, up almost 50 percent since the trough in March 2011. With no end to the escalation in sight, affordability is rapidly deteriorating nationally and especially in some key markets, such as Denver, Houston, Miami and Washington,” says Frank Martell, president and CEO of CoreLogic. “While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”
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