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CoreLogic Predicts Home Prices Will Rise 3.7 Percent This Year

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17 comments on CoreLogic Predicts Home Prices Will Rise 3.7 Percent This Year

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Please consider the CoreLogic US Home Price Insights for April 2023.

CoreLogic HPI™ is designed to provide an early indication of home price trends. The indexes are fully revised with each release and employ techniques to signal turning points sooner.

CoreLogic HPI Forecasts™ (with a 30-year forecast horizon), project CoreLogic HPI levels for two tiers—Single-Family Combined (both Attached and Detached) and Single-Family Combined excluding distressed sales.

February 2023 National Home Prices

Home prices nationwide, including distressed sales, increased year over year by 4.4% in February 2023 compared with February 2022. On a month-over-month basis, home prices increased by 0.8 % in February 2023 compared with January 2023

The CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.2% from February 2023 to March 2023 and increase on a year-over-year basis by 3.7% from February 2023 to February 2024.

Forecasts

CoreLogic HPI Forecasts™ are based on a two-stage, error-correction econometric model that combines the equilibrium home price—as a function of real disposable income per capita—with short-run fluctuations caused by market momentum, mean-reversion, and exogenous economic shocks like changes in the unemployment rate. 

The forecast accuracy represents a 95% statistical confidence interval with a +/- 2% margin of error for the index.

CoreLogic Year-Over-Year Measure Change

Rent, OER, Case-Shiller Percent Change From Year Ago

CPI, Rent, OER from BLS, Case-Shiller Data from St. Louis Fed

OER stands for Owners’ Equivalent Rent, a measure of what one would pay to rent one’s own house from oneself, unfurnished, without utilities.

HPI vs Case-Shiller Year-Over-Year Comparison

  • CoreLogic HPI: 4.4 Percent
  • Case-Shiller National: 3.8 Percent
  • Case-Shiller 20-Metros: 2.5 Percent 

Since Case-Shiller and CoreLogic both use similar logic on repeat sales, the year-over-year numbers should be close, and they are. 

Case-Shiller Trends

Housing peaked summer of 2022 nationally, generally June or July, but Miami and Chicago in August. 

Case-Shiller Home Price Index

Is the CoreLogic Forecast Silly?

I think so. 

  • The Fed has tightened significantly. 
  • The 30-year mortgage rate is currently 6.37 percent, up from 3.0 in June of 2021.
  • Home prices have barely begun to decline. 
  • Affordability is in the gutter.
  • The economy is weakening if not already in recession. 

A 10 or even 15 percent decline over the next year would not surprise me in the least. Alternatively, I would be surprised by any increase at all.

What Would It Take For CoreLogic to Be Correct?

I think it would take rate cuts by the Fed, lower inflation, much lower mortgage rates, no recession, and even bigger asset bubbles. 

That’s not impossible but what odds do you want to assign to such a scenario?

I suggest there is perhaps a 10 percent chance of prices rising by about 4 percent a year from now.

The catch is the Fed is leaning against asset bubbles and inflation.

If rates crash, it will be due to recession and asset bubble deflation. Home prices are highly unlikely to buck that trend.

Economy Weakening Fast 

On April 3, I noted Baseline GDPNow Forecast Drops 50 Percent Since March 23, But Final Sales Still Strong

Today I noted Factory Orders Unexpectedly Much Weaker Than Expected With Big Negative Revisions

Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

Real Gross Domestic Product (GDP) and Real Gross Domestic Income (GDI) 2022 Q4

Income estimates were off by a mile and the BEA revised key components of fourth-quarter GDP much lower.

For discussion, please see Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

Home Prices Are Falling Everywhere, But Not as Fast as They Rose

On April 1, I noted Home Prices Are Falling Everywhere, But Not as Fast as They Rose

There is no reason to expect a reversal of the current trend and every reason to expect declines will continue. 

Forget this East vs West home price reporting with prices allegedly rising in the East but falling in the West. 

A recession will send home prices lower across the board. 

The Risk is Deflation

Finally, please consider MishTalk Video, What’s the Real Risk Now, Is it Inflation or Deflation?

Given the obvious inflationary forces, that may seem like a silly question, but let’s take a closer look in a video discussion.

This post originated at MishTalk.Com

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17 Comments
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gametv
gametv
3 years ago
This is all about what is really happening at central banks. The amount of global QT has been almost zero. BOJ has been fighting to defend pegs and has added hundreds of billions and China was stimulating. One of the investment banks said that $1 trillion was added to QE in the months leading up to Feb. Much of the Fed’s QT had been offset by the reduction in Treasury balances and the latest liquidity injection to the banks is equivalent to adding more QE into the markets (since it props up banks even as assets are invested elsewhere).
If you look back at the last time there was a debt ceiling, the yields on long term debt exploded right after the debt ceiling was raised. Why? Because the Treasury flooded markets with supply of debt issuance. The market was starved of supply before the ceiling was raised, which suppressed interest rates. The ECB has plans to increase QT in summer. The BOJ has a new governor who will end the crazy policies there.
5 Trillion on ECB balance sheets, 7 Trillion on Fed. I dont know how much on BOJ, but it accounts for massive amount of the Japanese markets.
The only reason the markets have held up well for the last month is the injection of liquidity to banks and how that capital got deployed into the financial markets (while banks did not sell assets since Fed is giving them 100% face value).
This is ALL about supply and demand in financial markets and the big thugs in the markets are the central bankers. But they are at the end of their rope as inflation rages. Regulators are trying to get the banks ready for a brusing rise in interest rates that will kill home prices.
Look for 15-20% down in prices by end of year, 50% in 3 years time. This is the end of the bubble economy globally and all markets will feed on each other in the declines.
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Ultracrepidarian
Ultracrepidarian
3 years ago
just remember that that is an average. As such, it includes a whole lot of housing that exists in cities. Pretty much every city in America, but especially the ones under Democratic Party control, are seeing degeneration, rising crime, rising homelessness, falling attractions, and in general anyone who can afford to move out is doing so. Abandoned commercial real estate.
In my town, an exurb of a big city run by Democrats, the prices have been rising like wildfire and are in fact still rising even in the face of the looming recession and wave of unemployment
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Six000mileyear
Six000mileyear
3 years ago
There is a statistical mirage where CoreLogic may be right. Rising prices due to inflation negatively impacts first time home buyers the most, so relative more property is sold at a relatively higher price. I would need to see a data for first time home buyers to confirm the mirage.
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Mish
Mish
3 years ago
Reply to  Six000mileyear
Nope!
Both Case-Shiller and HPI use resales of the same house, not median price.
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Avery
Avery
3 years ago
I agree.
Krugman needs to go to Hicksville, Indiana and tell them that all federal government welfare is over and they are immediately hereby expelled from the U.S. of A.
No honors and benefits of living under IRS, DEA, DHS, FBI, CIA, NSA, DOD, ATF, FDA, CDC, DoED…
No Wall Street. No
Corporate media. No
Hollywood. No elite colleges.
They won’t know what to do!!!
I assure you he will be sent off with a deafening applause and a ticker tape parade out of town.
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worleyeoe
worleyeoe
3 years ago
“There is no reason to expect a reversal of the current trend and every reason to expect declines will continue.”
A recession is 2023 isn’t overly likely IMHO. I think that happens next year. Here’s three great reasons 3.7% increase sounds about right for now:
Reason #1 – falling mortgage rates (banking crisis)
Reason #2 – big inflation is done but may tick up this year some before falling again, 2% core PCE doesn’t arrive without a recession.
Reason #3 – fairly strong labor market still has some legs with services inflation remaining solid
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misemeout
misemeout
3 years ago
Reply to  worleyeoe
Reason #1 Rate hikes are going to continue.
Reason #2 Big inflation won’t be over until government deficit spending decreases. It will blow up again with the debt ceiling.
Reason #3 Real income will continue to be negative until inflation is under control.
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Matt3
Matt3
3 years ago
The risk is more likely yo be stagflation.
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MikeC711
MikeC711
3 years ago
As my primary business is SFHs, I have to say I enjoyed the preTightening years. I’d be cool enough with the tightening and some of the tax proposals if I had even a sliver of confidence that our government would spend it wisely. In that I think increasing revenues by $100B will only cause them to increase spending by $200B … I’m skeptical.
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Directed Energy
Directed Energy
3 years ago
LQQK at Alabama, cooking like ive been saying! Huntsville is the place to be. Nashville and Florida are cooking as well. People want normal, sane laws like America has always had, not wokeness. Not all this new garbage like the dumpster fires of NY and CA.
I suffered through too many years in liberal CA. Southern states have none of the garbage that CA has. No smogging cars or insane gas taxes, no water restrictions, no solar or natural gas mandates, electricity is $0.10 all day year round, no abortion, no trans in schools, etc etc
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Zardoz
Zardoz
3 years ago
Reply to  Directed Energy

I’m glad there’s a place for you folks to go. Fighting to keep the south in the union was clearly a mistake.

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MikeC711
MikeC711
3 years ago
Reply to  Zardoz
As a former yankee who loves the south … it can be a good thing to have a separation of blue and red.
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Zardoz
Zardoz
3 years ago
Reply to  MikeC711

… and we could end the tax transfers from blue to red states in the bargain

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StukiMoi
StukiMoi
3 years ago
Reply to  Zardoz
…along with he 25+x larger Fed, kangaroo-court shakedown, mandate and “asset return” transfers going the other way….
I have nothing against, nor for…, nor anything… “transes” and whatnot. But taxes and traditional “welfare” haven’t even risen above the noise floor, as far as real wealth transfers go, for decades by now. Some halfwit in NYC getting spoonfed a billion worth of Fed loot, stolen from both Red State and Blue State betters; while playing office in some so-called “bank”, “hedge fund” , PE outfit, VC or “law firm”; then occasionally returning a tiny, tiny fraction of that in nominal “taxes”; is no more relevant than obsessing over which direction prevailing winds happens to be blowing physical dollar bills lost out of car windows Since 1971, wealth redistribution have been done, almost exclusively, by way of money printing. Every other mechanism, while not technically non-existent; are by now practically entirely insignificant.
And as for whether Alabamans or New Yorkers are the ones collecting most in the form of rent, interest, mandated insurance, “representation” for dealing with silly mandates, “asset” trading commissions and the other components of Fed and Government driven transfers from the other……….
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Christoball
Christoball
3 years ago
Reply to  Directed Energy
Let us hope that The War of Blue Aggression is a short one.
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Lisa_Hooker
Lisa_Hooker
3 years ago
Reply to  Christoball
Sure.
The central bank of the US, the Federal Reserve Bank, is a Blue bank.
Just like during the War for Southern Independence.
Why would the results be any different this time?
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Directed Energy
Directed Energy
3 years ago
Reply to  Lisa_Hooker
Because Dems are unarmed weaklings?
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