CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for February 2020, which shows home prices rose both year over year and month over month. Home prices increased nationally by 4.1% from February 2019. On a month-over-month basis, prices increased by 0.6% in February 2020. (January 2020 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results each month.)
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CoreLogic Home Price Change & MCI by Select Metro Area; Feb. 2020 (Graphic: Business Wire)
The CoreLogic HPI Forecast projects U.S. home prices to increase by 0.5% from February 2020 to March 2020. Homes that settle during March will largely reflect purchase contracts that were signed in January and February, before the coronavirus (COVID-19) outbreak. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. (The HPI Forecast for February was produced with projections for economic variables available prior to mid-March and does not incorporate subsequent deterioration in the economy.)
“Before the onset of the pandemic, the quickening of home price growth during the first two months of 2020 highlighted the strength of purchase activity,” said Dr. Frank Nothaft, chief economist at CoreLogic. “In February, the national unemployment rate matched a 50-year low, mortgage rates fell to the lowest level in more than three years and for-sale inventory remained lean, all contributing to the pickup in value growth.”
According to the CoreLogic Market Condition Indicators (MCI), an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 33% of metropolitan areas have an overvalued housing market, 38% were at value and 29% were undervalued as of February 2020. 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. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% above the long-term, sustainable level. An undervalued housing market is one in which home prices are at least 10% below the sustainable level.
CoreLogic has been monitoring shifts in the housing market and economy in light of COVID-19. An analysis of mortgage demand revealed that home-purchase applications increased in January through the end of February as prospective buyers capitalized on record-low interest rates. However, purchase activity slowed in the latter half of March as unemployment began to rise and local shelter-in-place directives led to cancellations of open houses.
“The nearly 10-year-old recovery of the U.S. housing market has run headlong into the panic and uncertainty from the global COVID-19 pandemic,” said Frank Martell, president and CEO of CoreLogic. “In terms of home value trends, we are in uncharted territory as we battle the outbreak with measures that are generating a never-before-seen, rapid downshift in economic activity and employment. We expect that many homeowners will initially be somewhat cushioned by government programs, ultra-low interest rates or have adequate reserves to weather the storm. Over the second half of the year, we predict unemployment and other factors will become more pronounced, which will apply additional pressure on housing activity in the medium term.”
The next CoreLogic HPI press release, featuring March 2020 data, will be issued on Tuesday, May 5, 2020, at 8:00 a.m. ET.
The CoreLogic HPI™ is built on industry-leading public record, servicing and securities real-estate databases and incorporates more than 40 years of repeat-sales transactions for analyzing home price trends. Generally released on the first Tuesday of each month with an average five-week lag, the CoreLogic HPI is designed to provide an early indication of home price trends by market segment and for the “Single-Family Combined” tier, representing the most comprehensive set of properties, including all sales for single-family attached and single-family detached properties. The indices are fully revised with each release and employ techniques to signal turning points sooner. The CoreLogic HPI provides measures for multiple market segments, referred to as tiers, based on property type, price, time between sales, loan type (conforming vs. non-conforming) and distressed sales. Broad national coverage is available from the national level down to ZIP Code, including non-disclosure states.
CoreLogic HPI Forecasts™ are based on a two-stage, error-correction econometric 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. The U.S. forecast is calculated from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. With a 30-year forecast horizon, CoreLogic HPI Forecasts project CoreLogic HPI levels for two tiers — “Single-Family Combined” (both attached and detached) and “Single-Family Combined Excluding Distressed Sales.” As a companion to the CoreLogic HPI Forecasts, Stress-Testing Scenarios align with Comprehensive Capital Analysis and Review (CCAR) national scenarios to project five years of home prices under baseline, adverse and severely adverse scenarios at state, metropolitan areas and ZIP Code levels. The forecast accuracy represents a 95% statistical confidence interval with a +/- 2% margin of error for the index.
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