Home price gains are accelerating again, and in some cities those values are overheating.
Four of the nation's largest cities are now considered overvalued, according to CoreLogic. Home prices in Denver, Houston, Miami and the Washington, D.C., metropolitan area now exceed sustainable levels.
To determine if a market is overvalued, CoreLogic compares current prices to their long-run, sustainable levels, which are supported by local economic fundamentals like disposable income. An overvalued market is one in which home prices are at least 10 percent higher than that level. The rest of the top 10 markets are considered "at value," but none are undervalued, as prices are higher in all of them compared with a year ago.
"With no end to the escalation in sight, affordability is rapidly deteriorating nationally," said Frank Martell, president and CEO of CoreLogic. "While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge."
Home prices rose 6.7 percent nationally in June compared with June 2016. That is a slightly higher annual gain than May. Prices are now up nearly 50 percent from the trough of the housing crash in March 2011.
The soaring gains now are due to a historically short supply of affordable homes for sale. The number of homes for sale in June was 11 percent lower than a year ago, according to Realtor.com.
"As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years," said Frank Nothaft, chief economist at CoreLogic.
While the price gains are widespread, all real estate is still local, and some previously hot markets are actually cooling off. San Francisco is considered at value, with prices up just 5.3 percent, compared with an 8.7 percent annual gain in Denver. The New York City metropolitan area is seeing values up just over 3 percent annually and is considered at a sustainable level, but Houston, while seeing the same price gain is overvalued based on its economy.