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CoreLogic: Chicago Home Price Move Toward Balance

by James F. McClister

Moderate home price gains in February suggest the market may be stabilizing.

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Home prices continued their strong ascent in February, according to CoreLogic’s newest Home Price Index.

Including distressed sales, home prices climbed 5.6 percent from the same time last year, and 5.8 percent excluding distressed; both changes represent three years of consecutive year-over-year growth. Monthly gains, from January to February, were less pronounced at 1.1 percent.

In Chicago, home price growth was moderate relative to national gains, with prices (including distressed) rising 3.6 percent from Feb. 2014, and excluding, 4.4 percent. At the state level, price gains were similarly modest, as home prices, including distressed, jumped 3 percent, and excluding disclosed, 3.8 percent.

The city’s bump in home price signals a continuation of demand for Chicago real estate, but low inventory and falling construction spending are only going to work to force prices into echelons approaching overvalued. However, the slower pace of appreciation suggests the market may be reaching more of a balance.

Overall Positive

On the national stage, home price performance was largely positive; growth was nearly universal, and while some markets are fighting to stave off overwhelming appreciation, CoreLogic’s report was mostly welcome news:

  • Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to February 2015) was -12.2 percent. Excluding distressed transactions, the peak-to-current change for the same period was -7.8 percent.
  • Including distressed sales, only Connecticut, at -0.9 percent, experienced a decline in home prices.
  • Including distressed sales, the five states with the highest home price appreciation were: Colorado (+9.8 percent), South Carolina (+9.3), Michigan (+8.5 percent), Texas (+8.5 percent) and Wyoming (+8.4 percent).

A Record Breaking Spring

Rounding out 2014, the housing market shifted towards a posture of stability.

“Since the second half of 2014, the dwindling supply of affordable inventory has led to stabilization in home price growth, with a particular uptick in low-end home price growth over the last few months,” said Frank Nothaft, the chief economist for CoreLogic. “From Feb. 2014 to Feb. 2015, low-end home prices increased by 9.3 percent compared to 4.8 percent for high-end home prices, a gap that is three times the average historical difference.”

Low-end price appreciation is particularly welcome news, as lingering foreclosures are largely a problem for homeowners of lower income. Improving home prices should help push at least some of those homeowners out of negative equity while simply improving equity for others.

“This is the hottest home price appreciation prior to the spring selling season in nine years,” said Anad Nallathambi, the president and CEO of CoreLogic.

Nallathambi added that assuming interest rates stay benign and consumer confidence strong, then home prices are expected to rise an additional 5 percent over the next year.

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