Home prices predicted to keep dropping, many markets still overvalued

High-cost markets slow the most

It looks like home prices are going to continue their downward spiral. According to a new forecast, once final October numbers come in, they’ll likely show a drop from September to October — especially in high-cost markets like Hawaii and California.

Home prices to come

According to data from the CoreLogic HPI Forecast, home prices are predicted to drop 0.6 percent from September to October. Home prices jumped slightly from August to September, rising 0.4 percent.

Though prices aren’t yet declining — at least not at the national level — their growth has slowed 0.5 percent since 2017. In fact, according to the most recent Case-Shiller report, price gains have now hit a 20-month low.

Home prices aren’t that high, history shows

Price growth is particularly down in high-cost markets like Hawaii and California, according to Frank Nothaft, chief economist at CoreLogic.

“Hawaii, California and Massachusetts had median sales prices above $400,000 this summer, the highest in the nation, while annual home price growth slowed steadily between June and September in these three states,” Nothaft said. “When comparing September 2018 with September 2017, annual price appreciation slowed more in these states than in the U.S overall. Nationally, annual price growth slowed 0.5 percentage points. However, in Hawaii, California and Massachusetts growth rates decreased by 1.7, 0.7 and 1.0 percentage points, respectively.”

Home price growth, inventory shortages continue to let up

Room for improvement

There’s still room to improve, too. CoreLogic’s Market Condition Indicators show that homes are being overvalued in 38 percent of major metro areas. Just under half — 43 percent — are at value.

“When looking at only the top 50 markets based on housing stock, 46 percent were overvalued, 14 percent were undervalued, and 40 percent were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10 percent above the long-term, sustainable level. An undervalued housing market is one in which home prices are at least 10 percent below the sustainable level.”

A mere 19 of the nation’s top 100 metros were deemed as undervalued.

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