Home values continued their steady climb in October, rising 6.8% over the past year and just 1% from the previous month, according to recent national home price data. Looking ahead, future price appreciation is forecasted for 2016, though at a more moderate pace.
The nearly 7% year-over-year increase in home prices, as reported by the CoreLogic Home Price Index (HPI), reflects single family home values, including distressed sales. Excluding distressed sales, prices rose by 6.4% annually in October 2015.
“The rise in home prices over the past few years has largely been a healthy trend,” said CoreLogic President and CEO Anand Nallathambi in a written statement. “The shadow inventory has been reduced significantly and home equity levels are now approaching pre-recession levels.”
Over the next year, however, home prices are expected to moderate as the CoreLogic HPI Forecast projects values to increase 5.2% from October 2015 to October 2016.
“Many markets have experienced a low inventory of homes for sale along with strong buyer demand, which is sustaining upward pressure on home prices,” said CoreLogic’s Chief Economist Frank Nothaft in a statement. “These conditions are likely to persist as we enter 2016.”
As the housing market moves 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, said Nallathambi.
“This is especially true in several metropolitan areas where home prices have grown rapidly,” he said.
Metropolitan areas in Texas saw some the of biggest home price increases year-over-year, with the Dallas-Plano-Irving area leading the way with a 9.1% rise in values. Additionally, the Houston-The Woodlands-Sugar Land metropolitan statistical area was also among those seeing the largest yearly price gains, with values having risen 6.8% in October.
CoreLogic considers both areas to be “overvalued,” which it defines as having a current Home Price Index reading of 10% above the long-term fundamental value for that market. Conversely, an “undervalued” market is one that has an HPI of 10% below the long-term fundamental value for a given market.
By 2006, CoreLogic notes that home prices for the weighted average of the top 100 markets were more than 25% above the long-run sustainable levels. In October 2015, there were 46 markets that are considered overvalued—16 of them located in Texas.
View the CoreLogic October HPI data.
Written by Jason Oliva