The “healthy trend” of rising home prices is expected to slow next year to meet income trends.
Property analysts, CoreLogic released its Home Price Index and Forecast for October 2015 which shows home prices are up both year over year and month over month.
Home prices nationwide, including distressed sales, increased by 6.8 percent in October 2015 compared with October 2014. It also increased by 1.0 percent in October 2015 compared with September 2015, according to the CoreLogic HPI.
The CoreLogic HPI Forecast indicates that home prices are projected to increase by 5.2 percent on a year-over-year basis from October 2015 to October 2016, and the projected month-over-month gain is negligible (0.1 percent) from October 2015 to November 2015.
“The rise in home prices over the past few years has largely been a healthy trend. The shadow inventory has been reduced significantly and home equity levels are now approaching pre-recession levels,” said
Anand Nallathambi, president and CEO of CoreLogic.
“As we move forward, the rise in home prices will need to be better correlated to family income trends over time to avoid homes becoming unaffordable for many. This is especially true in several metropolitan areas where home prices have grown rapidly.”
The CoreLogic HPI Forecast values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.
“Many markets have experienced a low inventory of homes for sale along with strong buyer demand, which is sustaining upward pressure on home prices. These conditions are likely to persist as we enter 2016,” said Dr. Frank Nothaft, chief economist for CoreLogic.
“A year from now, as we finish out October 2016, we expect the CoreLogic national Home Price Index appreciation to slow to 5.2 percent.”
CoreLogic HPI Forecasts are based on a two-stage, error-correction structural model that combines the equilibrium home price—as a function of real disposable income per capita—with short-run fluctuations caused by market momentum, mean-reversion, and exogenous economic shocks like changes in the unemployment rate.