Home prices are on the rise, both on a year-over-year as well as a month-over-month basis. The latest CoreLogic Home Price Index (HPI) reported a 7.1 percent appreciation in home prices from May 2017 to May 2018. Month-over-month, they rose 1.1 percent from April 2018 to May, CoreLogic reported.
But they don’t seem to have deterred homebuyers from looking for homes this summer as the long-term desire for homeownership keeps the demand high despite rising prices, CoreLogic said citing a research it conducted along with RTi Research. The research revealed that the desire for homeownership was much stronger among renters in markets that had the highest home-price growth.
Lagging supply in many of the high-priced markets has continued, the research found, as fewer current homeowners considered putting their homes on the market. Over the next 12 months, 31 percent of renters were considering buying while only 11 percent of homeowners considered selling over that same period.
“The CoreLogic consumer research demonstrates that, despite high home prices, renters want to get out of their rental property and purchase a home,” said Frank Martell, President, and CEO of CoreLogic. “Even in the most expensive markets, we found four times as many renters looking to buy than homeowners willing to sell.” Until more supply becomes available, we will continue to see soaring prices in cities such as Denver, San Francisco, and Seattle.”
In fact, according to CoreLogic’s Market Conditions Indicators (MCI) released with the HPI, found that 40 percent of metropolitan areas had homes that were overvalued. In May, 26 percent of the top 100 metropolitan areas were undervalued and 34 percent were at value, CoreLogic said. When looking at the top 50 markets, the MCI data indicated that 52 percent of the markets were overvalued, 14 percent were at value, and 34 percent were undervalued.
“The lean supply of homes for sale is leading to higher sales prices and fewer days on market, and the supply shortage is more acute for entry-level homes,” said Dr. Frank Nothaft, Chief Economist for CoreLogic.
Rising mortgage rates were another reason that Nothaft said was affecting the supply of homes. “During the first quarter, we found that about 50 percent of all existing homeowners had a mortgage rate of 3.75 percent or less,” Nothaft explained. “May’s mortgage rates averaged a seven-year high of 4.6 percent, with an increasing number of homeowners keeping the low-rate loans they currently have, rather than sell and buy another home that would carry a higher interest rate.”
Learn more about CoreLogic's Home Price Index findings in April: