As home prices continuously increase, more markets are seeing values higher than their local economies can support.
Home prices increased by 6.9 percent nationally in April from the same period last year and estimated to rise an additional 5.3 percent over the next year, according to property data provider CoreLogic. While that is slightly less than the 7 percent annual jump in March, it is still making markets more unaffordable.
Looking ahead, CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 4.7 percent on a yearly basis from February 2018 to February 2019.
Of the nation’s 50 largest housing markets, 52 percent were considered to be overvalued in April.
A market is overvalued when home prices are at least 10 percent higher than the long-term, sustainable level.
Overvalued markets include Denver, Washington, D.C., Houston, Miami, New York, Las Vegas, and Los Angeles.
High demand and short supply continue to drive up home prices and the supply has been dropping for over three years. According to the National Association of Realtors, houses have been selling at the fastest pace on record since more homes came on the market this spring.
Production of houses are slowly increasing, but most of it is at the luxury level, not at the entry level, where most of US demand is.
Rising mortgage rates continue to weaken affordability. Rates have been rising at a steady pace this year. Mortgage applications to purchase a home have been falling for several weeks now.
Many argue that the current successful economy will support higher home values which appears to be the current case.