CoreLogic’s (CLGX) report on Tuesday showed tepid monthly home price growth but a solid yearly growth of 5.6% for February.

While it seemed to suggest that price growth shifted into a higher gear at the start of 2015, analysts at Capital Economics say that with housing close to fair value and the Fed set to begin tightening policy later this year, they don’t expect such rapid monthly gains to be sustained for long. 

“The 1.1% (monthly) rise in the CoreLogic house price index in February was unusually strong for this time of year,” writes Ed Stansfield, chief property economist for Capital Economics, in a client note. “Indeed, our own seasonal adjustment suggests that prices rose by an even stronger 1.3% (monthly), following January’s downwardly-revised 0.9% gain. This was close to a two-year high, and pushed the annual rate of price growth to 5.6%, up from 5.1% the previous month.” ?

Stansfield says that it’s not surprising that price pressures have increased at the start of this year. After all, the recent pick-up in home sales, along with the subdued number of homes coming onto the market, has caused supply conditions to tighten. In this context, and with real incomes and employment growing strongly, we expect house price inflation to accelerate to around 6.5% this year.

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(Source: Capital Economics)

“However, the scale of the revision to last month’s data, which saw a 1.1% (non- seasonally adjusted) rise cut to just 0.6%m/m, mean that we are inclined to take the latest CoreLogic numbers with a pinch of salt,” he says.

The surge in price growth that they suggest is contrary to the moderation implied by the alternative Case-Shiller index.

“We suspect that the truth may lie somewhere in between,” Stansfield says.

He says with expectations of price growth muted, housing now close to fair value and the Fed set to begin raising interest rates later this year, this seems unlikely. 

“Accordingly, while the conditions are certainly in place for a moderate acceleration in price growth this year, it looks like the CoreLogic index may be getting ahead of itself. We expect a return to more stable growth of around 0.5%m/m soon,” Stansfield says.