IRVINE, Calif.—A new forecast for where home prices are headed has been published, and with it analysis that suggests more than a third of the top 100 markets are overvalued.
The CoreLogic data show home prices nationally increased year over year by 7% from September 2016 to September 2017.
In addition, CoreLogic said its Home Price Index found on a month-over-month basis, home prices increased by 0.9% in September 2017 compared with August.
In addition, CoreLogic said its HPI Forecast indicates home prices will increase by 4.7% on a year-over-year basis from September 2017 to September 2018, and on a month-over-month basis home prices are expected to decrease by 0.1% from September 2017 to October 2017. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables, the company said. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.
“Heading into the fall, home price growth continues to grow at a brisk pace,” said Dr. Frank Nothaft, chief economist for CoreLogic. “This appreciation reflects the low for-sale inventory that is holding back sales and pushing up prices. The CoreLogic Single-Family Rent Index rose about 3% over the last year, less than half the rise in the national Home Price Index.”
According to CoreLogic Market Condition Indicators (MCI) data, an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 36% of cities have an overvalued housing stock as of September 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 company said.
In addition, as of September, 28% of the top 100 metropolitan areas were undervalued and 36% were at value. When looking at only the top 50 markets based on housing stock, 48% were overvalued, 16% were undervalued and 36% were at value, CoreLogic said. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level.
“A strengthening economy, healthy consumer balance sheets and low mortgage interest rates are supporting the continued strong demand for residential real estate,” said Frank Martell, president and CEO of CoreLogic. “While demand and home price growth is in a sweet spot, a third of metropolitan markets are overvalued and this will become more of an issue if prices continue to rise next year as we anticipate.“