June Home Prices Up Nearly 7%; Affordability Seen as Biggest Hurdle

CoreLogic, Irvine, Calif., reported June home prices jumped by 6.8 percent from a year ago and by 0.7 percent from May, belying earlier reports suggesting home price growth had begun to decelerate.

The CoreLogic Home Price Index reported Washington, Nevada, Idaho and Utah posted double-digit annual price growth. CoreLogic Chief Economist Frank Nothaft said the only thing slowing at the moment was sales, not prices.

“The rise in home prices and interest rates over the past year have eroded affordability and are beginning to slow existing home sales in some markets,” Nothaft said. “Home sales in the San Francisco Bay Area and Southern California were down 9 and 12 percent, respectively, from one year earlier. Further increases in home prices and mortgage rates over the next year will likely dampen sales and home-price growth.”

According to the CoreLogic Market Condition Indicators, 41 percent of the top 100 metropolitan areas have an overvalued housing market as of June. The MCI analysis 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). The report said 24 percent of the top 100 metropolitan areas were undervalued, and 35 percent were at value. When looking at only the top 50 markets based on housing stock, 54 percent were overvalued, 14 percent were undervalued and 32 percent were at value.

Looking ahead, the CoreLogic HPI Forecast said the national home-price index is projected to continue to increase by 5.1 percent on a year-over-year basis through June 2019. On a month-over-month basis, home prices are expected to be flat through July.

This year, CoreLogic and RTi Research, Norwalk, Conn., conducted a consumer housing sentiment study, combining consumer and property insights. The study assessed attitudes toward homeownership and the drivers of the home buying or renting decision process. The study found the desire to own a home is significantly higher among those in younger age cohorts. Younger Millennial renters (those under the age of 29) are significantly more likely to want to buy a home in the next 12 months than older Millennial or Generation X renters.

However, affordability for this group is a significant issue. The study reported 63 percent of younger Millennials who are not interested in home ownership identified the inability to afford a home or down payment as the reason they are not interested in buying at this time. This compared to 50 percent of older Millennial renters and 52 percent of Generation X renters. For their part, Boomer generation renters say their lack of interest in home ownership is driven by a lack of need at this stage in their lives.

“One-third of Millennial renters reported feeling they cannot afford a down payment to buy a home,” said Frank Martell, president and CEO of CoreLogic. “With home prices rising quickly over the past few years and supplies low, first-time homebuyers face ever-growing challenges to find and buy affordable entry-level homes. More needs to be done to help our first-time buyers join the homeownership class.”