Lower Rates, Moderating Price Growth Make a Great Environment for Buyers

Home prices remained stable in August, at least as reported by CoreLogic. The company's Home Price Index (HPI) increased 3.6 percent compared to the HPI in August 2018 and was 0.4 percent higher than in July. These are identical to the rates reported for both annual and monthly changes in July.  Rates of appreciation had been steadily declining prior to that and appear to have stabilized due to the impact of lower interest rates.

CoreLogic's chief economist Frank Nothaft noted that the months-long slowdown in appreciation has still left price growth well below its year-ago levels. "The 3.6 percent increase in annual home price growth this August marked a big slowdown from a year earlier when the U.S. index was up 5.5%. While the slowdown in appreciation occurred across the country at all price points, it was most pronounced at the lower end of the market. Prices for the lowest-priced homes increased by 5.5 percent, compared with August 2018, when prices increased by 8.4 percent. This moderation in home-price growth should be welcome news to entry-level buyers."

Connecticut was the only state where prices did not rise on an annual basis. The states with the greatest annual appreciation Idaho (11.6 percent) Utah (8 percent) and Maine (6.9 percent).

CoreLogic regularly reports on the valuation of the housing stock in the country's 100 largest metropolitan areas. In August they considered 37 percent of those metros to be overvalued, 23 percent undervalued, and 40 percent were at value. When only the top 50 markets are considered, 40 percent were overvalued, 16 percent were undervalued, and 44 percent were at value.  The valuation analysis compares home prices to their long-run sustainable levels as supported by local market fundamentals such as employment and disposable income.  An overvalued housing market is one in which home prices are at least 10 percent higher than the sustainable level, while an undervalued housing market has prices at least 10 below it.

The CoreLogic HPI Forecast indicates that home prices will increase by 5.8 percent from August 2019 to August 2020. On a month-over-month basis, home prices are expected to increase by 0.3 percent from August to September of this year.

CoreLogic conducted a consumer housing sentiment survey among Millennials during the second quarter. It found that about two-thirds of respondents indicated they are likely to buy a home in the future, however, there was a clear difference between older and younger Millennials' housing preferences.  Generally, older millennials (30-38) want to own a single, stand-alone home in the suburbs that is somewhat secluded. Meanwhile, younger millennials (21-29) lean towards modern apartment rentals in urban settings, with 55 percent of the younger respondents saying they prefer to also live in lively neighborhoods. Still, 79 percent of younger millennials are confident that they will be homeowners in the future.

"The millennial cohort has now entered the housing market in force and is already driving major changes in buying and selling patterns," according to CoreLogic President and CEO Frank Martell.  "Almost half of the millennials over 30 years old have bought a house in the last three years. These folks are increasingly looking to move out of urban centers in favor of the suburbs, which offers more privacy and a greener environment. Perhaps most significantly, almost 80 percent of all millennials are confident they will become homeowners in the future."