Welcome to the CoreLogic Economic Outlook for February 2020.
Economists often use national data to convey broad trends in the housing market, but that can obscure divergent behavior for some locales. As an example, the national CoreLogic Home Price Index increased more than 3% in 2019 and is forecast to rise about 5% in 2020. And while prices have risen in most places, the U.S. index masks the fact that many cities have had a dip in values over the last year and some will experience declines in 2020 as well.
We examined local value trends with the CoreLogic Home Price Index during the last 40 years. (Exhibit 1) Using annual price change across 954 places, we found that the share of places with a price decline varied from 1% to 94% over time, and there always were places with price declines even when the national index rose. During 2019 our index found more than 70 places that had an annual price decline, including the San Jose, CA and Bridgeport, CT metropolitan areas.
A severe price decline of 10% or more in one year is less common and reflects the severity of the local downturn. As the Great Recession deepened during 2008, nearly one-third of all places had an annual price drop of 10% or more. And the mid-1980s crash in oil prices led to an annual collapse in home prices of more than 10% in the Austin, TX and Tulsa, OK metropolitan areas.
Falling home prices have severe consequences for families, neighborhoods and mortgage lenders. A drop in value and rise in unemployment often triggers loan delinquency and can lead to foreclosure. The ability to monitor potential price declines can help lenders prepare loss mitigation strategies.
The CoreLogic Market Risk Indicators are a risk-management monitor. (Exhibit 2) The Indicators provide probability estimates of a one-year decline and a one-year severe decline of 10% or more, and is updated on a monthly frequency. Even though home price growth is expected to pick up in our national index in 2020, the Indicators identified which metros are likely to have a fall in home price in the coming year, totaling 2% to 3% of all places.
For more on CoreLogic’s perspective on the U.S. housing economy please visit the insights area of corelogic.com.
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