Home prices continue to increase throughout the nation for the 52nd consecutive month, according to CoreLogic’s monthly Home Price Index report — but some notable metros might have overvalued markets.
Including distressed sales, single-family home prices nationwide increased 1.3 percent from April to May, CoreLogic says, which came out to a 5.9 percent gain year-over-year. The real estate data firm forecasts home prices to jump another 0.8 percent in June and 5.3 percent by May of next year.
“Housing remained an oasis of stability in May, with home prices rising year-over-year between 5 percent and 6 percent for 22 consecutive months,” Chief Economist for CoreLogic Dr. Frank Nothaft said in a statement. “The consistently solid growth in home prices has been driven by the highest resale activity in nine years and a still-tight housing inventory.”
Although the HPI continues to move up year-over-year each month, it remains 7.2 percent below the peak values of April 2006. However, CoreLogic expects single-family home prices to reach a new peak by September 2017.
While markets around the country are experiencing healthy rebounds, CoreLogic points that many of them could be overvalued. Comparing the distance between a market’s long-term fundamental value and HPI, CoreLogic defined a current HPI of 10 percent above or below the long-term fundamental value for that market as undervalued or overvalued.
Notable overvalued markets include Denver, Houston, Los Angeles, Miami and Washington D.C., while Chicago and San Francisco were considered in normal market conditions.
The Houston-The Woodlands-Sugarland area was considered an overvalued market by CoreLogic, only trailing Boston of the metros studied in lowest month-over-month HPI growth and having the third lowest increases year-over-year. And things aren’t expected to get better: the HPI in the Houston metro is forecasted to grow only 1.2 percent by May of next year.
Texas as a whole enjoyed a healthy May, with 1.4 percent growth over April and 7 percent growth year-over-year. However, the HPI increases are expected to slow going forward, with forecasts of only 2.7 percent growth by May of next year.
CoreLogic’s home price index uses public record as well as servicing and securities real estate databases and incorporates more than 40 years of sales transactions to analyze trends. Its home price index forecasts are based on a two-stage model that combines the equilibrium home price (as a function of real, disposable income per capita) with short-run fluctuations caused by market changes and other economic “shocks” — shifts in the unemployment rate, for example.
