In September, home prices climbed by 3.5% from the previous year, according to CoreLogic’s latest Home Price Forecast.
The CoreLogic HPI projects future home price growth based on several economic variables and measures the number of owner-occupied households in each state.
According to CoreLogic’s data, home prices increased by 0.4% from August and are now projected to increase by 5.6% come September 2020.
Despite September’s appreciation growth, Frank Nothaft, CoreLogic’s chief economist, said housing affordability significantly improved during the month, providing a substantial boost in homeownership demand.
“Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership,” Nothaft said. “In addition to lower interest rates, personal income grew faster than home prices during the past year.”
Nothaft said this provided an additional lift for first-time buyer affordability and helped to boost the homeownership rate to the highest level in more than five years.
Nevertheless, CoreLogic indicates that the nation’s Millennial homebuyers, who often tend to fit in the first-time buyer category, are still experiencing affordability challenges.
During the second quarter of 2019, CoreLogic conducted a survey measuring consumer-housing sentiment among Millennial homebuyers.
The company’s findings revealed that while Millennials are more optimistic about housing affordability than their older counterparts, but many are not particularly confident with their personal finances or the U.S. economy.
According to the study, 42% of older Millennials, aged between 30 and 38, expressed struggles with affordability as they claimed to have spent more on their home purchase than expected.
Frank Martell, CoreLogic’s president, and CEO said while Millennials are ready to enter the market, the challenges they face while purchasing a home are likely to impact their financial futures.
“All 50 states posted positive home price trends in September with the average price nationally rising 3.5%,” Martell said. “As a group, more Millennials are entering the home-buying market and they report spending more money than they anticipated. “
Martell said this may impact their future financial planning, as over the past three years, on average, older Millennials have put down less than 20% for a down payment and have utilized funds reserved for retirement.
As homebuyers in this demographic spend an average of $383,000 on a home, housing affordability is a top concern, especially as CoreLogic’s recent MCI report revealed that 36% of the nation’s metropolitan areas had an overvalued housing market as of September.
The MCI, which details the housing values in America’s 100 largest housing markets, 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 and more, according to CoreLogic.
During the month, 23% of the country’s top 100 metropolitan areas were undervalued, and 41% were at market value, according to the company.
NOTE: The CoreLogic HPIis based on public record, servicing and securities real-estate databases and incorporates more than 40 years of repeat-sales transactions for analyzing home price trends.