Dive Brief:
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Home prices in the U.S. rose 0.8% from November to December and were up 7.2% year-over-year, according to the latest CoreLogic Home Price Index. The monthly increases have followed similar rate hikes reported for the past few months.
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CoreLogic forecast home prices to climb 4.7% from December 2016 to December 2017, mirroring the annual gain forecast in November. Home prices are expected to increase 0.1% from December 2016 to January 2017.
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The November to December increase came out 0.7% higher than was predicted last month. Eight states saw home prices rise from a year ago at or above the national rate: Colorado (8.9%), Florida (7.4%), Hawaii (7.5%), Idaho (9.0%), Oregon (10.3%), Tennessee (7.2%), Utah (8.0%) and Washington (10.8%) — up from seven states at or above the national rate in November.
Dive Insight:
While the housing market continues its steady march to recovery, strong demand and tight inventory conditions continue to put pressure on prices. CoreLogic expects price increases of just under 5.0% this year, anchored by a shortage of supply and persisting demand, the company’s president and CEO, Anand Nallathambi, said in a statement.
Similarly, analysts forecast a slowdown in home-price growth going into 2017. In a November 2016 interview with Construction Dive, Realtor.com’s chief economist, Jonathan Smoke, predicted that price increases would drop off to 3.9% in 2017, down from 2016’s posted 4.9% increase. Forty-six of the 100-largest U.S. metros, in turn, would see a depreciation of at least 1.0%, he said.
Though low mortgage rates in the past have opened up homeownership to more potential buyers, rising rates and a limited supply of lots and skilled labor could further hamstring the market. Rate hikes, in turn, could reduce refinancing activity and trade-ups, paving the way for mortgage-backed securities to be treated as higher-risk investments, which could raise rates further, according to a December report from the Urban Institute’s Housing Finance Policy Center.
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