Aerial view neighborhoodHome prices posted strong increases on both an annual and monthly basis during August.

Property information provider CoreLogic reports its Home Price Index (HPI) jumped 6.9 percent from August 2016 and 0.9 percent from July 2017.

"While growth in home sales has stalled due to a lack of inventory during the last few months, the tight inventory has actually helped stabilize price growth," said CoreLogic Chief Economist Dr. Frank Nothaft.

"Over the last three years, price growth in the CoreLogic national index has been between 5 percent and 7 percent per year, and CoreLogic expects home prices to increase about 5 percent by this time next year."

A closer look

An analysis of the country’s 100 largest metropolitan areas based on housing stock shows 34 percent of cities have an overvalued housing stock as of August 2017, according to CoreLogic Market Conditions Indicators (MCI) data.

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.

As of August, 27 percent of the top 100 metropolitan areas were undervalued and 39 percent were at value. An analysis of only the top 50 markets based on housing stock revealed that 46 percent were overvalued, 16 percent were undervalued, and 38 percent were at value.

An overvalued housing market is defined as one in which home prices are at least 10 percent higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10 percent below the sustainable level.

CoreLogic CEO Frank Martell points out that nearly half of the nation’s 50 largest markets are overvalued. “The lack of real estate affordability has spread beyond the typically expensive coasts into the interior of the nation,” he said, “hitting cities such as Denver, Nashville, Austin and Dallas.”

A look ahead

The CoreLogic HPI Forecast (a projection of home prices using the CoreLogic HPI and other economic variables) indicates home prices will increase by 4.7 percent on a year-over-year basis from August 2017 to August 2018.

On a month-over-month basis, home prices are expected to inch up 0.1 percent from August 2017 to September 2017. 

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