On an annual basis, home prices rose 3.5 percent in September, according to CoreLogic’s latest Home Price Index (HPI™) report. By September 2020, CoreLogic expects home prices to rise 5.6 percent, the report shows.
Thirty-six percent of the 100 largest markets are overvalued, a condition CoreLogic defines as when “home prices are at least 10 percent higher than the long-term, sustainable” trend, according to the HPI report; 41 percent are at-value; and 23 percent are undervalued (“at least 10 percent below the long-term, sustainable” trend). Across the 50 largest markets, 40 percent are overvalued; 44 percent are at-value and 16 percent are undervalued.
“Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership,” says Dr. Frank Nothaft, chief economist at CoreLogic. “In addition to lower interest rates, personal income grew faster than home prices during the past year. This provided an additional lift for first-time buyer affordability and helped to boost the homeownership rate to the highest level in more than five years.”
Affordability challenges remain. In an additional CoreLogic and RTi Research study, 42 percent of aged 30-38 millennials (the generation’s oldest segment) were not anticipating how expensive their home really was, at an average $383,000, with a 16 percent down payment—cobbled from retirement savings, in certain instances.
“As a group, more millennials are entering the home-buying market and they report spending more money than they anticipated,” says Frank Martell, president and CEO, CoreLogic. “This may impact their future financial planning. Millennials age 30-38 put down less than 20 percent for a down payment over the past three years and used funds from their retirement accounts to cover an average of 7 percent of that down payment.”
For more information, please visit www.corelogic.com.