Smaller Declines In Home Prices Expected Even With Some “At-Risk” Markets

Mortgage News February 18, 2023

Home price index data for November were released the first week of this month by the FHFA and S&P Case Shiller. Although they showed moderate declines month-over-month, they remained high year-over-year. As for CoreLogic’s home price data from last week (for December only), it shows a modest 0.4% decline month-over-month and a 6.9% annual increase.

In addition to updating the hard data, CoreLogic provides forecasts to augment the data, which is higher than historical norms before the post-pandemic boom.  It is estimated that the year-over-year number will drop to +3.0% next month.

There is a phenomenon in economics known as “base effects.” This means that numbers from 12 months ago will no longer be included in a calculation, and thus, they will change–sometimes substantially. In this month’s year-over-year number, last December is included, but in next month’s it will not. It would appear that the new year-over-year number fell a lot if last December was a strong month (it was).

It is interesting to note that the same forecast that predicted the big drop in annual price appreciation also predicted a slowdown in price losses, with January’s losses only 0.2% versus December’s 0.4%.

Also, CoreLogic did not hold back when identifying the top 5 markets with the highest risk of price declines. Listed below are the top 5 Metropolitan areas with very above 70% probability of a price decline and a 50-75% confidence score.

  1. Salem, OR
  2. Bellingham, WA
  3. Bremerton-Silverdale, WA
  4. Crestview-Fort Walton Beach-Destin, FL
  5. Olympia-Tumwater, WA

These aren’t necessarily the only 5 markets that saw modest corrections in prices year-over-year, and this doesn’t necessarily mean a major decline. In some corners of some markets, several clients have already experienced declines over the past year. It doesn’t matter what happens, there is nothing remotely similar to the housing market before the financial crisis.

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