Photo: Robert Clark
Despite rising home prices and abysmally low inventory levels nationwide, many renters are holding fast to the American Dream of owning their own home, according to the latest Home Price Index by CoreLogic.
“Being a homeowner makes consumers feel safe in their homes, and renters really want something to call their own,” Frank Martell, CEO of CoreLogic, said in a statement.
National home prices increased on both an annual and monthly basis in October, rising 5.4 percent year-over-year and 0.5 percent month-over-month. October marked the fourth consecutive month of annual price growth below 6 percent.
“Rising prices and interest rates have reduced home buyer activity and led to a gradual slowing in appreciation,” Dr. Frank Nothaft, chief economist for CoreLogic, said in a statement.
North Dakota was the only state to show a year-over-year decline in prices this month, with home prices sliding 1.2 percent annually. West Virginia, Nevada, and Idaho posted double-digit growth.
Looking ahead, the HPI Forecast predicts that national home prices will increase by 4.8 percent on a year-over-year basis from October 2018 to October 2019. And on a month-over-month basis, CoreLogic expects prices to decrease by 0.7 percent from October to November 2018.
According to a recent survey conducted by CoreLogic and RTi Research, nearly half of all renters said buying a home was important to them because they wanted to own something that was truly their own — in spite of challenging for-sale market conditions that are not expected to ease up all that much in 2019.
October’s mortgage rates were the highest in over seven years, further eroding buyer affordability.
“Despite higher interest rates, many renters view a home purchase as a way to build wealth through home-equity growth, especially in areas where rents are rising quickly, like Phoenix and Las Vegas, where the rents rose 6 percent or more during the last 12 months,” said Nothaft.
And 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, 35 percent have an “overvalued” housing market (as of October 2018).
Additionally, as of October 2018, 24 percent of the top 100 metropolitan areas were “undervalued,” while 41 percent were “at value.”
The MCI analysis categorizes home prices in individual markets as “undervalued,” “at value” or “overvalued” by comparing home prices to their long-term, sustainable levels, which are supported by local market fundamentals — such as disposable income.
The MCI defines an overvalued housing market as one in which home prices are at least 10 percent above the long-term, sustainable level, and an undervalued housing market is one in which home prices are at least 10 percent below the sustainable level.