The growth in home prices is set to slow this year, according to CoreLogic’s latest Home Price Index (HPI®) Report.
Analysts at CoreLogic expect home prices to rise 4.8 percent by January 2019; in January 2018, prices rose 6.6 percent year-over-year. The HPI in January 2018 was 1.1 percent higher than it was in April 2006, its peak prior to the recession.
Homes with lower prices have appreciated the most, the report reveals: 9 percent year-over-year, compared to a 5.3 percent gain for the highest-priced homes, a 6.9 percent gain for middle- to moderate-priced homes, and an 8.2 percent gain for low- to middle-priced homes.
“Entry-level homes have been in particularly short supply, leading to more rapid home price growth compared with more expensive homes,” says Dr. Frank Nothaft, chief economist for CoreLogic. “Homes with a purchase price less than 75 percent of the local area median had price growth of 9.0 percent during the year ending January 2018. Homes that sold for more than 125 percent of median appreciated 5.3 percent over the same 12-month period. Thus, first-time buyers are facing acute affordability challenges in some high-cost areas.”
In January 2018, the greatest growth was in Washington, where home prices were up 12.1 percent year-over-year. Idaho, Nevada and Utah also had double-digit gains.
Thirty-four percent of the 100 largest metros are overvalued, or a condition CoreLogic defines as when “home prices are at least 10 percent higher than the long-term, sustainable level,” the report shows; 39 percent are at value, and 27 percent are undervalued (“home prices are at least 10 percent below the sustainable level”).
“A rise in mortgage rates coupled with home price growth further erodes affordability,” says Frank Martell, president and CEO of CoreLogic. “CoreLogic has identified nearly one-half of the 50 largest metropolitan areas as overvalued. Millennials who are looking to become first-time homeowners find it particularly challenging to find an affordable home in these areas. Our projections continue to show tightness in the entry-level market for the foreseeable future, which could further prevent millennials from purchasing homes in 2018 and 2019, even as much of that generation reaches its prime home-buying years.”
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