The CoreLogic (NYSE: CLGX) Home Price Index and HPI Forecast for February 2020 showed home prices rose both year over year and month over month before the coronavirus outbreak became evident.
Home prices increased nationally by 4.1% from February 2019. On a month-over-month basis, prices increased by 0.6% in February 2020.
“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.”
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.
“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.
Martell added, “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.”
