Lack of Supply Drives January Home Prices Up 5.7%

Home prices rose by 5.7% year over year in January 2015, driven by a lack of supply in some markets, the latest CoreLogic Home Price Index Report finds.

On a month-over-month basis, home prices increased by 1.1% in January compared to December 2014, data show. Excluding distressed sales, home prices were up 1.4% month over month in January.

However, home prices nationwide remain 12.7% below their April 2006 peak, data show. Excluding distressed sales, home prices were still 8.6% below their peak.

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“House appreciation has generally been stronger in the western half of the nation and weakest in the mid-Atlantic and northeast states,” says Dr. Frank Nothaft, chief economist at CoreLogic, in a statement, noting that the trends in part reflect the strength of regional economies.

“Colorado and Texas have had stronger job creation and have seen 8 to 9% price gains over the past 12 months in our combined indexes,” he says. “In contrast, values were flat or down in Connecticut, Delaware and Maryland in our overall index, including distressed sales.”

Looking ahead, CoreLogic projects an increase of 0.4% month-over-month in February, and national home prices are expected to rise by 5.3% from January 2015 to January 2016 including distressed sales.

Excluding distressed sales, home prices are expected to rise 0.3% from January to February, and increase by 4.9% year over year from January 2015 to January 2016.

A lack of supply in many parts of the country is a big factor driving up prices, says Anand Nallathambi, president and CEO of CoreLogic.

“Many homeowners have taken advantage of low rates to refinance their homes, and until we see sustained increases in income levels and employment they could be hunkered down so supplies may remain tight,” he says. “Demand has picked up as low mortgage rates and the cut in the FHA annual insurance premium reduce monthly payments for prospective homebuyers.”

Access the latest CoreLogic report here.

Written by Cassandra Dowell

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  • This kind of increase should be great news for endorsement growth yet few realistically believe it will be despite continuing and relatively low HECM expected and note interest rates. 5.7% is better than the appreciation rate we assume in most HECM amortization schedules.

    Here is but another example of good endorsement growth environment news with a weak to very poor expected endorsement response in May or June. Can anyone point out why the market is reacting this way?

  • The principal limit was lowered so much that it will take at least 5 years at a 5.7% value growth rate to recoup back to previous levels and with the LESA another 3-5years growth. That’s not even factoring in margin increases and mip increases that have already happened AND rate increases that will most likely happen soon.

    Values are increasing but not enough to make much difference, and on the sell side, it’s killing inventory because the gap between what you can sell for and what you have to purchase for has gotten larger, not smaller.

    Finally, if people already refinanced at a 3.5-4% rate, their payment will be affordable for a much longer time, maybe forever. No reason to refinance or sell.

    People make financial decisions because they want and/or need to, it benefits them. When then benefit declines, the decision declines.

    • JusttheFactsMa’am,

      An interesting comment but your math is way off.

      First with an annually compounding 5.7% growth rate in home values, the 15% drop in principal limit factors (“PLFs”) without considering the change to PLFs on 8-4-2014 will be made up in less than 3 years but only if the value of the home needed to make up the difference is less than $625,500.

      As to your point on LESAs, there is no way of telling how long that will take without knowing both the value of the home and the size of the LESA at closing if a 5.7% annually compounding growth rate in home values is assumed.

      As to the rest of your comment, your points are logical but the real estate market is not uniform across the US nor is it always so logical. The lack of logic many times describes the actions and motivations of buyers and sellers. At times real estate market conditions dictate how buyers and sellers react and without knowing the market, the reactions defy logic altogether.

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