Home-price gains remained strong in July, and there’s no slowdown in sight, according to a report released Tuesday.
The national home price index from real estate data provider CoreLogic rose 6.7% compared to a year ago, with particular strength in the Pacific Northwest and Western mountain states. CoreLogic forecasts 5% price growth for the year ahead.
But the firm has underestimated home price growth for several years, as have many housing economists. Most have expected a return of some rational balance of economic fundamentals to the market. After all, home prices can’t continue to rise at a pace that far exceeds wage growth indefinitely, they believe.
But so far they have. Average hourly wages grew just 2.5% in the 12 months ending July, the Labor Department reported last week.
As CoreLogic’s deputy chief economist Sam Khater told MarketWatch, the market is responding to a “pressure cooker effect:” relentless demand and ultra-lean inventory.
Also read: Why aren’t there enough houses to buy?
It’s worth noting that Khater expects July’s reported price changes to be revised down slightly. Last July CoreLogic forecast a 5.4% price increase for the year ahead, so that may turn out to be closer than some of the others from the past few years.
And there’s some evidence that the ferocious pace of selling is dampening some buyer enthusiasm. Sales of previously-owned homes fell to an 11-month low in July as inventory fell 9% compared to a year ago.
Also read: Existing-home sales tumble to 2017 low as supply crunch bites
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