Home prices made strong year-over-year gains in May, according to CoreLogic’s Home Price Index (HPI).
However, the HPI also found that price appreciation is outstripping income growth in many markets, which still lack adequate inventory, and that tighter inventory is impacting rental markets.
Home prices increased 1.2 percent in May compared with April. Nationwide, home prices increased 6.6 percent from May 2016 to May 2017. CoreLogic predicts home prices will increase by 5.3 percent from May 2017 to May 2018.
“The market remained robust with home sales and prices continuing to increase steadily in May,” CoreLogic Chief Economist Frank Nothaft said in a release. “While the market is consistently generating home price growth, sales activity is being hindered by a lack of inventory across many markets.”
“This tight inventory is also impacting the rental market where overall single-family rent inflation was 3.1 percent on a year-over-year basis in May of this year compared with May of last year. Rents in the affordable single-family rental segment (defined as properties with rents less than 75 percent of the regional median rent) increased 4.7 percent over the same time, well above the pace of overall inflation,” Nothaft added.
CoreLogic President and CEO Frank Martell said the recent home appreciation is increasing home equity, but isn’t necessarily good for renters or potential first-time homebuyers.
“With price appreciation and rental inflation outstripping income growth, affordability is destined to become a bigger issue in most markets,” Martell said.