Home prices have risen 6.7 percent since this time last year, according to the most recent Home Price Index released by CoreLogic this morning. Prices are now nearly 50 percent higher than their low point, reached in March 2011.
Over the month, home prices were up 1.1 percent compared to May. By the end of 2017 though, CoreLogic forecasts price growth will slow, largely due to inventory shortages, according to Dr. Frank Nothaft, Chief Economist at CoreLogic.
“The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory,” Nothaft said. “As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years.”
Overall, CoreLogic’s HPI forecasts a price growth of about 5.2 percent over the year.
According to Frank Martell, President and CEO of CoreLogic, overcoming the current inventory shortage is crucial to keeping U.S. homes affordable.
“Home prices are marching ever higher, up almost 50 percent since the trough in March 2011,” Martell said. “With no end to the escalation in sight, affordability is rapidly deteriorating nationally and especially in some key markets such as Denver, Houston, Miami, and Washington. While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolved the housing supply challenge.”
The HPI also shed light on home prices in individual metro markets—specifically, if average prices are undervalued, at value, or overvalued. According to the report, there were four metros overvalued for the month of June: Denver-Aurora-Lakewood, Colorado; Houston-The Woodlands-Sugar Land, Texas’ Miami-Miami Beach-Kendall, Florida; and Washington-Arlington-Alexandria in the District of Columbia, Virginia, Maryland, and West Virginia.
According to CoreLogic, an overvalued market is “one in which home prices are at least 10 percent higher than the long-term, sustainable level, while an undervalued market is one in which home prices are at least 10 percent below the sustainable level.”