CoreLogic: Home price growth triggering 'affordability crisis' in US markets

Dive Brief:

Home prices in the U.S. rose 1.1% from July 2016 to August 2016, according to the latest CoreLogic Home Price Index, and are up 6.2% from August 2015. The HPI includes distressed sales. The month-over-month gains are consistent with the growth rate reported from June 2016 to July 2016.
CoreLogic predicted home prices will increase 5.3% from August 2016 to August 2017. From August 2016 to September 2016, the market should see a smaller increase that it did this month at only 0.4%, according to CoreLogic.
The District of Columbia, Colorado, North Carolina, Texas and 15 other states reached new home-price highs in August. Excluding distressed sales, five states — South Dakota, West Virginia, Colorado, Washington and Oregon — posted record high year-over-year home price appreciation for the month.

Dive Insight:

Home prices' continued march upward is triggering an "affordability crisis" in many markets, CoreLogic President and CEO Anand Nallathambi said in a release. As of August 2016, the index recorded 113 markets nationwide as "overvalued," with the majority in the Southwest and Mid-Atlantic states, as well as Texas and Florida. The Midwest, meanwhile, remained undervalued and is trailing in economic recovery.

Inventory of new and existing homes remains a challenge, and it is one of the major contributors to the rise in housing prices as first-time buyers return to the market after renting their way through the recession. As the market waited for the release of more existing, entry-level homes as owners trade up for larger properties, inventory nationwide was down nearly 7% year-over-year during the third quarter, according to real estate website Trulia. A leveling of the market may be on the horizon, but it’s too soon to tell what shape that may take.

Zillow reported last month that income growth had begun to outpace that of home values, suggesting that a cooldown in prices could be ahead as supply-side headwinds like labor and lot availability easeand builder confidence returns to higher levels.

A ranking out this week from Realtor.com put metros in California, Colorado and Texas among the leading housing markets in September, based on how fast properties sell and how often pages advertising the real estate are viewed on the organization’s website. Although markets in those regions, among others, have begun to add back inventory, it’s not yet at the level required to impact home prices significantly.

Meanwhile, economists warn that the market will not be able to sustain the growth in housing prices for much longer. If the predictions in August’s HPI are fulfilled, the projected month-over-month and year-over-year gains in housing prices are poised to slow slightly — which could mark an evening out of home prices as existing homes are released into the market and inventories refill with new and existing properties.