In December, home prices climbed by 4% from the previous year, according to CoreLogic’s latest Home Price Forecast.
The CoreLogic HPI projects future home price growth based on several economic variables and measures the number of owner-occupied households in each state.
According to CoreLogic’s data, home prices increased by 0.3% from November 2019 and are now projected to increase by 5.2% come December 2020.
Frank Nothaft, CoreLogic’s chief economist, said the nation’s housing affordability has worsened as a lack of inventory continues to drive home price growth.
“Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers,” Nothaft said. “Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median.”
CoreLogic indicates these price gains are negatively impacting the nation’s Millennial homebuyers, who not only tend to fall into the first-time buyer category but also continue to grapple with affordability woes.
During the second quarter of 2019, CoreLogic conducted a survey measuring consumer-housing sentiment among the nation’s younger and older Millennials, aged between 21 and 29, and 30 and 38, respectively.
The company’s findings revealed while 79% of younger Millennial renters express a desire to purchase a home in the future, many still cite affordability as a top concern.
“On a national level, home prices are on an upswing. Price growth is likely to accelerate in 2020. And while demand for homeownership has continued to increase for Millennials, particularly those in their 30s, 74% admit they have had to make significant financial sacrifices to afford a home,” Frank Martell, CoreLogic’s president and CEO said. “This could become an even bigger factor as home prices reach new heights during 2020.”
This is concerning for the demographic, considering CoreLogic’s recent MCI report revealed that 40% of the nation’s metropolitan areas had an overvalued housing market as of January.
The MCI, which details the housing values in America’s 100 largest housing markets, 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 and more, according to CoreLogic.
During the month, 40% of the country’s top 100 metropolitan areas were overvalued, 26% were undervalued and 41% were at market value, according to the company.
NOTE: The CoreLogic HPI is based on public record, servicing and securities real-estate databases and incorporates more than 40 years of repeat-sales transactions for analyzing home price trends.
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