CoreLogic, Redfin Report Modest June Home Price Gains

Reports from CoreLogic, Irvine, Calif, and Redfin, Seattle, saw June home prices rise modestly.

The monthly CoreLogic Home Price Index reported June home prices rose by 3.4% year over year and by 0.4% month over month. Single-family home prices rose to another record high.

CoreLogic Chief Economist Frank Nothaft noted uneven price appreciation across different tiers. “Tepid home sales have caused home prices to rise at the slowest pace for the first half of a year since 2011,” he said. “Price growth continues to be faster for lower-priced homes, as first-time buyers and investors are both actively seeking entry-level homes. With incomes up and current mortgage rates about 0.8 percentage points below what they were one year ago, home sales should have a better sales pace in the second half of 2019 than a year earlier, leading to a quickening in price growth over the next year.”

According to the CoreLogic Market Condition Indicators, an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 38% of metropolitan areas have an overvalued housing market as of June. Twenty-four percent of the top 100 metropolitan areas were undervalued, and 38% were at value. When looking at only the top 50 markets based on housing stock, 42% were overvalued, 16% were undervalued and 42% were at value.

Looking ahead, the CoreLogic HPI Forecast suggest annual price growth to increase by 5.2% through June 2020. On a month- -month basis, the forecast calls for home prices to increase by 0.5% from June to July 2019.

During the second quarter, CoreLogic and RTi Research, Norwalk, Conn., conducted a survey measuring consumer-housing sentiment among various millennial age cohorts. The study found home-price increases in lower-cost homes disproportionately impact older millennials (ages 30-39). Additionally, this cohort is significantly more active in searching for a new home than any other age group. Nearly half (45%) said they purchased a home in the past three years, while 25% say they will likely do so within the next year. While affordability concerns drive older millennials toward renting, they have more positive market perceptions than older generations and 37% say purchasing a home within their market is at least somewhat affordable.

“Millennial homebuyers are no longer a trend on the industry horizon,” said CoreLogic President and CEO Frank Martell. “In fact, they are the new, first-time homebuyers of today. However, only about half of recent millennial buyers were satisfied with the number of options of available homes in their market or price range. Affordable housing continues to be a growing issue. A deeper look at the data shows that 43% of those surveyed indicated they couldn’t afford to buy a new home or are concerned they won’t be able to.”

Meanwhile, Refdin reported the average sale price for luxury homes nationwide increased 1 percent year over year to $1.64 million in the second quarter, marking a modest return to the trend of rising luxury home prices, which was interrupted by a 1.7 percent decline in the first quarter.

Redfin tracked home sales in more than 1,000 cities across the U.S. (not including New York City) and defined a home as luxury if it’s among the 5 percent most expensive homes sold in the quarter. In the other 95 percent of the market, home prices increased 3.2 percent year over year to an average of $322,000 in the first quarter, a continuation of seven straight years of increases.

The report said sales of homes priced at or above $1.5 million declined 4.6 percent year over year in the second quarter, the third consecutive quarter of dropping sales in the category, though the decline was much smaller than the 13.8 percent dip last quarter. Sales of homes priced under $1.5 million dropped 6.7 percent year over year.

Redfin said supply of homes priced at or above $1.5 million increased by 18.7 percent in the second quarter, the fifth straight quarter of rising luxury inventory and the biggest increase in two years. Supply of homes priced under $1.5 million increased just 2.1 percent annually.

“Luxury home sales have been relatively soft since early 2018 when the tax code overhaul made it so that people with big mortgages and those living in high-tax states and counties couldn’t deduct as much from their annual tax bill,” said Redfin chief economist Daryl Fairweather. “But wealthy Americans who would otherwise be considering a multi-million dollar home purchase may now be a bit spooked that the economic expansion they’ve been enjoying for the past decade could soon be nearing its end.”

Fairweather said business owners and people with large investments are paying close attention to the escalating trade war and other uncertainties in global markets. “Despite the fact that the economy at home is continuing to grow, these and other signs that a recession could be looming are likely causing well-heeled homebuyers to feel extra cautious about a big purchase or investment,” she said.

Redfin said luxury homes are selling slightly faster than last year. The typical luxury home that sold in the second quarter went under contract in 68 days, down slightly from 71 days a year before, the fastest pace luxury homes have sold in at least a decade. The typical non-luxury home that sold during the same time period went under contract seven days faster than a year earlier, in 56 days.

The report said just 1.3 percent of homes priced in the top 5 percent sold above list price in the second quarter, down from 1.6 percent a year earlier. That’s a much smaller share of homes sold above list price than the other 95 percent of homes; among those, 23.4 percent sold above list price in the second quarter.

Two Las Vegas suburbs are among the cities with the biggest increases in luxury home prices in the second quarter. In Paradise, Nev., where home prices in the top 5 percent of homes increased 46.8 percent year over year, more than any other city, the average luxury home sold for $1.079 million. In Henderson, Nev., seventh on this quarter’s list, the average luxury home sold for $1.233 million, up 16.4 percent from the year before. Cities in Florida, including Fort Lauderdale, St. Petersburg and Tampa, also experienced some of the biggest increases in luxury home prices. Though it’s typical for Florida cities to be among the regions with the biggest increases in the category, this is the first time since the third quarter of 2017 a Florida city hasn’t topped the list.

Seattle, Washington, D.C., Honolulu and San Jose–among the most expensive real estate markets in the U.S.–are among the cities where luxury home prices have dropped the most. In Seattle, home prices for the top 5 percent of the market declined 14.4 percent to roughly $2.2 million in the second quarter, and in San Jose prices in the same category dipped 8.2 percent to $2.37 million.

The report can be accessed at https://www.redfin.com/blog/q2-2019-luxury-housing-report.