Home prices were up in September but low rates helped affordability

The homeownership rate gained in September as lower mortgage rates helped offset a rise in home prices.

The CoreLogic Home Price Index for the month showed a 3.5% increase in prices nationally year-over-year and a 0.4% month-over-month gain. But along with rates, income is working in homebuyers’ favor.

“Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership,” said Dr. Frank Nothaft, chief economist at CoreLogic. “In addition to lower interest rates, personal income grew faster than home prices during the past year. This provided an additional lift for first-time buyer affordability and helped to boost the homeownership rate to the highest level in more than five years.”

What’s ahead for 2020?
Looking ahead, price appreciation should pick up pace through to September at least.

The CoreLogic HPI Forecast calls for a 5.6% increase by September 2020. For the month from September to October 2019, the forecast is for a 0.3% rise.

Meanwhile, the CoreLogic Market Conditions Indicators show that among the country’s 100 largest metropolitan areas based on housing stock, 36% had an overvalued housing market as of September 2019, 23% were undervalued, and 41% were at value.

Among the 50 largest metros, 40% were overvalued, 16% were undervalued and 44% were at value.

This is based on an overvalued housing market defined as one in which home prices are at least 10% above the long-term, sustainable level. An undervalued housing market is one in which home prices are at least 10% below the sustainable level.