U.S. home prices rose 6.6% in January compared with the same month a year ago, according to CoreLogic’s Home Price Insights monthly report released Tuesday. The research firm had previously forecast a dip of 0.4% year over year. The data include sales of distressed properties.
Month over month, January prices rose 0.5%, including distressed home sales. CoreLogic expects housing prices to rise by 4.8% year over year by January 2019 and to remain flat month over month in February 2018.
CEO Frank Martell noted:
A rise in mortgage rates coupled with home-price growth further erodes affordability. CoreLogic has identified nearly one-half of the 50 largest metropolitan areas as overvalued. Millennials who are looking to become first-time homeowners find it particularly challenging to find an affordable home in these areas. Our projections continue to show tightness in the entry-level market for the foreseeable future, which could further prevent millennials from purchasing homes in 2018 and 2019, even as much of that generation reaches its prime home-buying years.
Chief Economist Frank Nothaft added:
Entry-level homes have been in particularly short supply, leading to more rapid home-price growth compared with more expensive homes. Homes with a purchase price less than 75 percent of the local area median had price growth of 9.0 percent during the year ending January 2018. Homes that sold for more than 125 percent of median appreciated 5.3 percent over the same 12-month period. Thus, first-time buyers are facing acute affordability challenges in some high-cost areas.
Including distressed sales, home prices rose the most year over year in Washington (12.1%), Nevada (11.3%), Utah (10.8%) and Idaho (10.3%).
Prices in 36 states (including the District of Columbia) have risen above their pre-crisis peaks, and prices in three states are no more than 5% below their pre-crisis peaks. Of the seven states that had larger peak-to-trough declines than the national average, California, Idaho and Michigan have returned to the peak as of January 2018. Nevada home prices in January 2018 were the farthest below their all-time index high, still 22% below the March 2006 peak.
See the CoreLogic January report for more detail.