Assessing the HPI Forecast Validation Report – February 2019

By Kathy Kirkendall Housing Affordability, Real Estate

The HPI Forecast Validation Report is out for February 2019. The report compares the November 2018 HPI index with what the HPI Forecast Report predicted it would be 12 months earlier.

The HPI Forecast makes projections of home prices using the CoreLogic HPI and a number of economic variables. It derives values from state-level forecasts by weighing indices based on the quantity of owner-occupied households for each state. Examining the accuracy of the HPI forecasts over a 12-month period is vital to ensuring that the report remains reliable and valuable to the industry, so let’s see how the forecasts fared.

HPI Forecast Validation Report

Delving into the results

Nationally, the report’s forecast of a 4.7 percent increase in home prices over the 12-month period fell within 0.1 percent of the actual 4.8 percent increase reported by the HPI. Month to month, our forecasts were slightly below the actual values throughout the year.

As we look at the numbers from a regional perspective, we see that while some markets continue to accelerate at strong rates, other markets have unique dynamics – creating diverse behaviors across the country.  Drilling down into core-based statistical areas, two areas fell exactly as predicted, with the CBSAs of Cambridge-Newton-Framingham, MA, and St. Louis, MO-IL, rising 5.5 percent and 3.7 percent respectively, just as forecast. The 2017 forecast also predicted the home prices of nine metropolitan statistical areas within 1 percent of their true value. This includes Los Angeles, which continues to be among the most accurately predicted metros despite its large housing stock and severe inventory shortage.

On the other side of the spectrum, the widest gap between predicted and actual value was for San Diego, CA, with the forecast of 10.4 percent falling 6.4 percent short of the actual 4 percent rise in value over 12 months. This discrepancy was due to decreasing demand and concerns over long-term affordability in the area.

The takeaway

Overall, in spite of unusual market volitivity caused by severe inventory shortages and rising interest rates, the latest HPI Forecast Validation Report shows that the HPI Forecast continues to provide extremely valuable insight into where the housing market is heading. Lenders leveraging our HPI Forecast product can gain critical information to assist with risk management or similar use cases.  See the full report for a complete view of the findings.

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