Real estate industry analysts have voiced concerns that home values in some of the nation’s biggest property markets are “overheating”, with big consequences for affordability in those areas.
Experts from CoreLogic, a provider of real estate industry data and intelligence, told CNBC that home prices in Denver, Houston, Miami and Washington D.C. now “exceed sustainable levels”.
CoreLogic compared current housing prices with their long-term sustainable level, using local data such as average disposable incomes to determine that the markets were overvalued. The analyst firm said it defines an overvalued market as one where current home prices are a minimum 10 percent higher than those sustainable levels.
“With no end to the escalation in sight, affordability is rapidly deteriorating nationally,” said Frank Martell, president and CEO of CoreLogic. “While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”
That escalation was recently highlighted by Zillow, which reported in July that the median price of U.S. homes topped $200,000 for the first time ever. In addition, the National Association of Realtors reported that home prices gained 6.7 percent nationwide in June, compared to one year earlier. It also pointed out that home prices are up almost 50 percent from where they were in March 2011.
Rising values are being blamed on an acute shortage of affordable homes for sale. In June, housing inventory was down almost 11 percent compared to June 2016.
“As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years,” said Frank Nothaft, chief economist at CoreLogic.