National home prices increased 6.6 percent year over year in December 2017, and are forecast to increase 4.3 percent from December 2017 to December 2018. Home prices rose 5.9 percent for the full year of 2017, up from a 5.4 percent annual gain for 2016. Further, an analysis of the market by price tiers indicates that lower-priced homes experienced significantly higher gains, according to the latest CoreLogic Home Price Index (HPI®) Report.
CoreLogic analyzes four individual home-price tiers that are calculated relative to the median national home sale price. The lowest price tier increased 9.2 percent year over year, compared with 8.2 percent for the low- to middle-price tier, 6.9 percent for the middle- to moderate-price tier, and 5.3 percent for the high-price tier. Figure 1 shows the historical levels of the four price tiers indexed to January 2006, shortly before each of the tiers hit its peak index value.
The overall HPI (all price tiers combined) has increased on a year-over-year basis every month since February 2012 and has gained 51.2 percent since hitting bottom in March 2011. As of December the overall HPI was 1 percent higher than its pre-crisis peak in April 2006. Adjusting for inflation, U.S. home prices increased 5 percent year over year in December 2017, and were 16 percent below their peak. Figure 2 shows the cumulative price movement since the inception of price declines for both the nominal HPI and the inflation-adjusted HPI, as well as the time in years since the first decrease in the indices.
Figure 3 shows the year-over-year HPI growth in December 2017 for the 25 highest-appreciating states along with their highest and lowest historical price changes. The state of Washington showed the largest HPI gain of all states in December 2017 with a 12 percent year-over-year increase, followed by Nevada with a 11 percent gain. Four states (Washington, Nevada, Utah, and Idaho) showed double-digit year-over-year increases in December. Prices in 35 states (including the District of Columbia) have risen above their pre-crisis peaks, and prices in four states are no more than 5 percent below their pre-crisis peaks. Of the seven states that had larger peak-to-trough declines than the national average, only California and Idaho have returned to the peak as of December 2017. Nevada home prices in December 2017 were the farthest below their all-time HPI high, still 22.6 percent below the March 2006 peak.
The four price tiers are based on the median sale price and are as follows: homes priced at 75 percent or less of the median (low price), homes priced between 75 and 100 percent of the median (low-to-middle price), homes priced between 100 and 125 percent of the median (middle-to-moderate price) and homes priced greater than 125 percent of the median (high price).
The Consumer Price Index (CPI) Less Shelter was used to create the inflation-adjusted HPI.