While overall home price growth is beginning to moderate, lower-priced homes continue to outpace higher priced homes in appreciation, continuing to challenge young millennials interested in homeownership.
Nationally, home prices rose 5.6 percent over the year in September, 3.8 percent when adjusting for inflation, according to the latest CoreLogic Home Price Index [1], released yesterday. CoreLogic [2] expects home prices to increase another 4.7 percent by next September.
Home price appreciation, while not uniform, is nearly ubiquitous. Home prices increased in every state, except North Dakota, which experienced a slight decline of 0.6 percent over the year in September, according to CoreLogic’s data. Nevada and Idaho posted the highest home price appreciation over the year in September, rising 12.8 percent and 12 percent, respectively.
Home prices have been on the rise since February 2012 and have increased 57.5 percent since their March 2011 trough. While nominally, they are 5.5 percent above their peak, when adjusting for inflation, CoreLogic determined prices are 13.3 percent below their peak.
Homes at the higher end of the price spectrum are experiencing much slower appreciation than those at the lower end, according to CoreLogic, which breaks the housing market into four price categories for its analysis. The lowest price category includes homes priced no more than 75 percent of the median home price, while the high-priced homes include any homes priced higher than 125 percent of the median home price.
Homes in the highest price tier rose 4.5 percent over the year in September, while homes in the lowest price tier climbed 8.5 percent. In fact, low-priced homes have been outpacing the high-end market since 2013. Over that time, prices at the lower end of the price spectrum have risen 47 percent compared to just 25 percent growth in the highest price tier.
This environment of rapid home price growth at the bottom of the market has been especially challenging to young millennials interested in becoming homebuyers.
“Our consumer research indicates younger millennials want to purchase homes, but the majority of them consider affordability a key obstacle,” said Frank Martell, President and CEO of CoreLogic.
“Less than half of younger millennials who are currently renting feel confident they will qualify for a mortgage, especially in such a competitive environment,” he added.
Young millennials continue to reveal interest in homeownership with 40 percent saying they are “extremely or very interested in homeownership,” and 64 percent claiming to monitor home values regularly, according to a consumer housing sentiment study conducted by CoreLogic and RTi Research [3].
However, 73 percent of young millennials surveyed say affordability is “a barrier to homeownership,” according to CoreLogic.