As an antidote to ensuing confusion, one turns, then, to Frank Nothaft (pictured), the chief economist at CoreLogic, who offers more measured musings of what might lie ahead. In the latest CoreLogic Home Price Index, home value appreciation rose by an astounding 18% in November when compared to the previous year’s comparable data.
Calmly, and without question-mark-induced equivocation, Nothaft dispassionately details dynamics that have prompted some to envision balloon-bursting scenarios ahead.
“We continue to have near record low mortgage rates and, at the same time, a scarcity of inventory on the market,” he told Mortgage Professional America in a telephone interview. “So, with record level mortgage rates, that helps to drive demand to drive homes, and yet we have a shortage of inventory offered for sales on the marketplace,” he continued. “So, between the two forces – rising demand and declining supply – that’s what’s been driving home prices up. Home prices have been rising at a double-digit rate for a number of months now, and we continue to see that in our latest data for the month of December.”
Such dynamics are a Catch-22, enabling established homeowners to take equity from homes for a variety of uses but further eroding affordability for first-time homebuyers. Ultimately, government intervention will be needed to quell the fire, with increased rates on the horizon for this year.
But hold off on talk of a crash for now. Despite his own amazement of current upward value trends, he won’t go so far as to predict a crash in favor of envisioning a “slowdown,” he said. The economist suggested he’s further comforted by mulled steps from the Federal Reserve System to curb current trends.
