The pace of home price increases picked up in November, increasing by 3.7 percent on a year-over-year basis, up from 3.5 percent in October. CoreLogic said its Home Price Index (HPI) posted a monthly gain of 0.5 percent, a substantial uptick from the 0.2 percent gain the prior month. The index, which covers both market and distressed sales, hit a recent peak of 6.62 percent in April 2018 before beginning a steady slowdown.
CoreLogic's chief economist Frank Nothaft said, "The latest U.S. index shows that the slowdown in home prices we saw in early 2019 ended by late summer. Growth in the U.S. index quickened in November and posted the largest 12-month gain since February. The decline in mortgage rates, down more than one percentage point for fixed-rate loans from November 2018, has supported a rise in sales activity and home prices.
"Prices rose on an annual basis in every state but Connecticut. The top two states for annual home price increases were unchanged from October; Idaho, up 10.2 percent and Maine with an 8.6 percent increase. West Virginia was third at 6.9 percent, replacing Indiana in the lineup. Washington D.C. was the fastest appreciating metro with 3.9 percent annual price growth.
The CoreLogic HPI Forecast indicates that home prices will increase by 5.3 percent on a year-over-year basis from November 2019 to November 2020. On a month-over-month basis, home prices are expected to increase by 0.2 percent from November 2019 to December 2019. The CoreLogic HPI Forecast is a projection of home prices 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.
As of November, CoreLogic's market Conditions Indicator considers home prices in 34 percent of the top 100 metro areas to be overvalued, 39 percent were at value, and 27 percent were undervalued. When looking at only the top 50 markets, 40 percent were overvalued, another 40 percent were at value, and 20 percent were undervalued. The categories are determined by comparing current prices to the areas' long-term sustainable levels as supported by local fundamentals such as disposable income. An overvalued area has prices 10 percent or more above those sustainable levels while an undervalued area is 10 percent or more below the 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. The study showed that a significant number of older millennials (ages 30-38) are strongly considering moving within the next 12 months, with 64 percent of this cohort expecting to purchase a home, reinforcing this group's interest in the housing market. Meanwhile, 57 percent of younger millennials (ages 21-29) plan on renting their next home. Despite the purchase intent among older millennials, 43 percent still view homeownership as unaffordable and out of reach.
"We're continuing to see a split among older and younger millennials when it comes to their plans to purchase a home" CoreLogic CEO and President Frank Martell commented. "While older millennials are looking forward to participating in the housing market in the future, their younger counterparts don't see themselves buying a home anytime soon. With home prices expected to rise just over 5 percent over the next 12 months, affordability remains a concern for most prospective buyers."