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Home prices continue to trend upward

HPI, housing bubble
July 15, 2016

By Pam Leibfried

Home prices in May 2016 (the latest month for which data is available) increased an average of 5.9 percent nationally vs. home prices in May 2015. While a definite improvement, housing prices nationally are still 7.2 percent below their 2006 highs, as reported in the CoreLogic Home Price Index (HPI®) Report.

The month-over-month increase since April 2016 was 1.3 percent, beating Core Logic’s forecast by nearly 50%. 

Is another housing bubble about to burst? 

In 40% of metro areas, prices are at new highs, exceeding previous 2006 peak values. And another 30 percent of metros are within 10% of their previous peak. The news is best if you live in Oregon: prices there have risen 11% since last May! And if you live in Washington (up 10.1 percent) or Colorado (up 9.4 percent), your home has likely appreciated considerably this past year too. If you live in the Eastern states of Connecticut, New Jersey or Pennsylvania, though, the odds aren’t in your favor, as the average homes there showed year-over-year price decreases. 

So with 47 of 50 states showing year-over-year price increases and 70 percent of metro areas approaching or exceeding past price highs, are we experiencing another price bubble that is about to burst? 

Core Logic recently analyzed the factors contributing to the current upswing in home prices to determine if they are following the same patterns that lead to the Great Recession housing market crash. And the answer they reported is good news for homeowners. The previous bubble was fed by real estate speculation and a “real estate perpetual motion machine” wherein a seemingly ever-expanding housing market drove a large portion of overall economic growth. Currently, in contrast, it is the strengthening economy that is prompting home value appreciation:

“Could we be headed for another housing market crash? The short answer is most likely no, because the current run-up in prices is being driven almost entirely by fundamentals – solid job growth boosting housing demand and limits on supply as new home construction slowly drifts upward from record low levels – and not by easy credit and investor frenzy.”

Outlook for mortgage rates, refis and home equity loans 

Because mortgage rates have been hovering at near-historic lows, the expectation is that mortgage rates will increase in the near future – especially if the Federal Reserve raises interest rates. 

Once mortgage rates go up, fewer homeowners will benefit from refinancing their homes. However, the trend of homeowners utilizing home equity loans to further take advantage of the increasing value of their homes will likely continue. is expected to continue its current trend upward. 

Pam Leibfried is a marketing content specialist whose love of words led to a writing and editing career. After a brief stint teaching English, she transitioned to corporate communications and spent 20 years at The Nielsen Company before joining Alliant’s content development team. Early in her work life, Pam’s friend Matt explained the benefits of a 401(k) and her dad encouraged her to start a Roth IRA. Their good counsel prompted her to prioritize retirement savings, which just might enable her to retire early so she can read more and live out the slogan on her fave T-shirt:  “I have a retirement plan: I plan on quilting.”