Home prices surge to another high

Annual home price appreciation continued unabated in January with growth accelerating at its fastest rate in decades and leading to overvaluation in some markets, according to CoreLogic.

CoreLogic’s Home Price Index increased 19.1% in January on an annual basis, the most rapid since its inception in the 1970s, after a year-over-year jump of 18.5% in December. Prices also climbed by 1.4% on a monthly basis as well.

Despite ongoing market and economic challenges, including limited inventory, buyer competition and declining affordability, the appetite for purchases remains elevated this winter, wrote Dr. Frank Nothaft, chief economist at CoreLogic. But he added that signs indicate the hot pace was likely to hit a slight cooldown.

"In December and January, for-sale inventory continued to be the lowest we have seen in a generation. Buyers have continued to bid prices up for the limited supply on the market,” Nothaft said in a press release.

“However, the rise in mortgage rates since January further eroded buyer affordability and is expected to slow price gains in coming months,” he said.

Last week, the Mortgage Bankers Association predicted interest rates will increase to 4.3% by the end of 2022. CoreLogic anticipates that by next January home prices will appreciate at an annual pace of 3.8%.

On a regional level, homes in the Mountain West and South saw the highest rate of price growth, with their states at the top of the list in home appreciation. Arizona was No. 1 at a 28.3% price increase year over year, followed by Florida with 27.9%. Utah, Nevada and Tennessee rounded out the top five at 25.2%, 25% and 24.7% respectively.

But CoreLogic also rated some of the major metropolitan areas in those states, including greater Phoenix, Las Vegas and Miami regions, as overvalued based on market condition indicators. Phoenix prices grew by 30.2% year over year, Las Vegas homes appreciated by 25.2% while Miami saw an 18.7% increase since January 2021. The Lake Havasu City/Kingman market in Arizona was also listed as the market at greatest risk of depreciation over the next 12 months.

Markets are labeled as overvalued if the current home price indexes exceed their long-term values by greater than 10%.

The District of Columbia experienced the slowest pace of price appreciation, growing by 3.8%. Ranking ahead of the capital were Alaska at 7.4%, North Dakota at 7.8% New York at 8% and Illinois at 10%.

CoreLogic uses numbers from public record, servicing and securities real-estate databases to come up with its Home Price Index each month. Its Januarry report also mirrored recent analysis of Fannie Mae and Freddie Mac purchase data by the Federal Housing Finance Agency, whose experts found prices moderating in the final quarter last year but still near their highest-ever annual increase.

CoreLogic’s index also tracks values of detached and attached homes. For detached properties, prices increased by 20.3% annually in January, while detached units, such as townhomes and condominiums, appreciated by 15.2%.