Home prices in the U.S. rose 0.8% from November to December and were up 7.2% year-over-year, according to the latest CoreLogic Home Price Index. The monthly increases have followed similar rate hikes reported for the past few months.
CoreLogic forecast home prices to climb 4.7% from December 2016 to December 2017, mirroring the annual gain forecast in November. Home prices are expected to increase 0.1% from December 2016 to January 2017.
The November to December increase came out 0.7% higher than was predicted last month. Eight states saw home prices rise from a year ago at or above the national rate: Colorado (8.9%), Florida (7.4%), Hawaii (7.5%), Idaho (9.0%), Oregon (10.3%), Tennessee (7.2%), Utah (8.0%) and Washington (10.8%) — up from seven states at or above the national rate in November.
While the housing market continues its steady march to recovery, strong demand and tight inventory conditions continue to put pressure on prices. CoreLogic expects price increases of just under 5.0% this year, anchored by a shortage of supply and persisting demand, the company’s president and CEO, Anand Nallathambi, said in a statement.
Similarly, analysts forecast a slowdown in home-price growth going into 2017. In a November 2016 interview with Construction Dive, Realtor.com’s chief economist, Jonathan Smoke, predicted that price increases would drop off to 3.9% in 2017, down from 2016’s posted 4.9% increase. Forty-six of the 100-largest U.S. metros, in turn, would see a depreciation of at least 1.0%, he said.
Though low mortgage rates in the past have opened up homeownership to more potential buyers, rising rates and a limited supply of lots and skilled labor could further hamstring the market. Rate hikes, in turn, could reduce refinancing activity and trade-ups, paving the way for mortgage-backed securities to be treated as higher-risk investments, which could raise rates further, according to a December report from the Urban Institute’s Housing Finance Policy Center.
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