Photo: Robert Clark
National home price appreciation is on track to continue to decelerate in 2019 as interest rates climb higher, according to the latest Home Price Index (HPI) from CoreLogic.
“The rise in mortgage rates has dampened buyer demand and slowed home-price growth,” Dr. Frank Nothaft, CoreLogic chief economist, says in a statement.
At the national level, home prices (including distressed sales) rose 5.1 percent year-over-year in November. Compared to the previous month, home prices were up 0.4 percent in November.
CoreLogic expects home prices will rise by 4.8 percent on a year-over-year basis from November 2018 to November 2019, with much of the slowing attributed to waning demand and rising interest rates.
In November 2018, average interest rates for new 30-year fixed-rate loans were 4.9 percent — the highest monthly average since February 2011.
“It’s really about perspective. When I was a first-time buyer, rates were over 10 percent. Millennials need to make a tenure choice. Do they want to buy or do they want to rent,” says Nothaft.
Rising interest rates will likely offset any gains prospective buyers would see from slowing price growth. And higher monthly mortgage payments are going to price some buyers out of an already competitive market.
And while higher rates and home prices have reduced buyer affordability, home sellers are responding by lowering their asking price — which Nothaft says was reflected in the slowing growth seen in the CoreLogic HPI.
Some homeowners, however, have offered different theories.
Some 20 percent of homeowners reported that “being in a desirable location” was increasing their home’s value, according to a survey conducted by CoreLogic and RTi Research. A strong local and national economy was cited by 16 percent of respondents, while 13 percent said that for sale inventory in their area was “limited.”
“A strong economy helps homeowners feel confident about the value of their property,” Frank Martell, president and CEO of CoreLogic, says in a statement.
Martell adds that if recent stock market declines manage to shake consumer confidence in the national economy, then homeowners’ perception of home value may change and we could see a buyers’ market emerge sometime in 2019.
Meantime, in an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, CoreLogic reported that 35 percent of metropolitan areas had an overvalued housing market as of November 2018.
The analysis categorized 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.
Additionally, some 27 percent of the top 100 metropolitan areas were undervalued, while 38 percent were at value in November 2018.