Home prices are increasing both month-over-month and annually, but that could soon reverse course and drop in January, according to the Home Price Index from CoreLogic, a global property information, analytics and data-enabled solutions provider.
Home prices increased by 6.6% from December 2016 to December 2017, and increased 0.5% from November to December, the report shows.
However, while annually prices will continue to climb, rising 4.3% from December 2017 to December 2018, the CoreLogic HPI Forecast shows home prices will slip in January, falling 0.4%.
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.
“The number of homes for sale has remained very low,” CoreLogic Chief Economist Frank Nothaft said. “Job growth lowered the unemployment rate to 4.1% by year's end, the lowest level in 17 years.”
“Rising income and consumer confidence has increased the number of prospective homebuyers,” Nothaft said. “The net result of rising demand and limited for-sale inventory is a continued appreciation in home prices.”
CoreLogic’s Market Condition Indicators model shows that home prices have risen so much that, in 35 of the nation’s 100 largest metropolitan areas, the housing market was overvalued as of December 2017.
The MCI analysis categorizes home prices in individual markets as undervalued, at value or overvalued by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals such as disposable income.
The report showed another 28 of the top metros were undervalued and 37 were at value.
“Home prices continue to rise as a result of aggressive monetary policy, the economic and jobs recovery and a lack of housing stock,” CoreLogic President and CEO Frank Martell said. “The largest price gains during 2017 were in five Western states: California, Idaho, Nevada, Utah and Washington.”
“As home prices and the cost of originating loans rise, affordability continues to erode, making it more challenging for both first time buyers and moderate-income families to buy,” Martell said. “At this point, we estimate that more than one-third of the 100 largest metropolitan areas are overvalued.”