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Real Estate

Homes still undervalued despite price gains - CoreLogic

Despite double-digit percentage increases in home prices, homes are still undervalued relative to incomes, according to CoreLogic, a research and analytics company.

"There is no need to fear a bubble for at least a few years to come, if at all," Mark Fleming, CoreLogic chief economist, wrote in a blog post.

Fleming said that home prices did get way ahead of income levels in the early 2000s, but a significant over-correction has taken place. He contends that incomes are key to forecasting home prices, saying that home-price growth cannot be sustained at higher levels than income growth because housing would become unaffordable and demand would decline.

"Rising interest rates and the 'unlocking' of pent-up supply as home prices continue to increase are expected to slow the pace of home price appreciation," Fleming wrote. "At the same time, continued improvement in the economy will modestly increase income growth. The net effect is that home prices are expected to remain slightly undervalued relative to income levels through the end of 2015."

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