According to CoreLogic’s February 2019 Home Price Index, home price gains hit 4%, the lowest level of price gains since June 2012. With such modest price gains coupled with falling interest rates, will home prices begin to rise again?
The short answer is yes. “We expect (home price gains) to grow over the remainder of 2019 to 4.7% by 2020,” said the president and CEO of CoreLogic, Frank Martell.
This prediction comes just as affordability has been improving slightly. Frank Nothaft, chief strategist with CoreLogic, concurs with Martell. “A strong buying season (due to lower interest rates, rising inventory though mostly in upper end markets and the slowdown in home prices) could lead to a pickup in home price growth later this year.”
CoreLogic’s February 2019 Home Price Index gain of 4% was down from the February 2018 gain of 6.4%. All price tiers have been slowing in terms of price appreciation. That being said, the lowest price tier increased +5.6% y/y; the low-mid price tier increased +4.9% y/y; the mid-moderate price tier increased +4.2% y/y and the high price tier increased +3.3% y/y. Overall the Home Price Index has gained +57.8% since the market bottomed out in March 2011 and is 6% higher that its pre-crisis peak.
States with the highest price gain increases y/y in February 2019 were Idaho at +10.2%, Nevada at +8.9% and Utah at +8.7%. Idaho had the steepest decline in price gains at -1.7% and Connecticut home prices in February 2019 were the farthest below their all-time high, still -17.2% below their July 2006 peak.
According to Fitch Ratings, new home supply on the market is at its highest level in more than 8 years. Higher priced homes in the Northeast and the West seem to be accounting for this increase. Grant Bailey, the managing director of Fitch, said, “The Western US in particular has seen listings for mid-to-high tier prices homes increase by 30% last month compared to the same time period last year.”
Even the supply of entry-level homes has increased somewhat, a real shift from the past four years of shrinking inventories in this segment of the market. This inventory rise is good news for the overall housing market. The more inventory there is and the more interest rates fall, the more competition there will be and then, the more home prices will begin to rise.
Thanks to CoreLogic and CNBC as data sources.
