U.S. home prices rose 5.6% in September compared with the same month a year ago, according to data from CoreLogic released Tuesday in the research firm’s Home Price Insights monthly report. The data include sales of distressed properties.

The September index increase represents the slowest year-over-year growth in home prices since January 2017.

Month over month, September prices rose 0.4%, including distressed home sales. CoreLogic expects housing prices to rise by 4.7% year over year by September 2019 and to drop by 0.6% month over month in October 2018.

Home prices rose 5.5% year over year and 0.1% month over month in August. The September totals continue modestly declining pace that began last month.

Since the housing market bottomed out in March 2011, the CoreLogic index has risen by 57.5%. As of September, home prices are now 5.5% higher than they were at the April 2006 pre-crash peak. Adjusted for inflation, however, home prices are 13.3% below the April 2006 peak.

CEO Frank Martell noted:

Our consumer research indicates younger millennials want to purchase homes, but the majority of them consider affordability a key obstacle. Less than half of younger millennials who are currently renting feel confident they will qualify for a mortgage, especially in such a competitive environment.

Chief Economist Frank Nothaft added:

The erosion of affordability in the highest cost markets has begun to slow home price growth. Hawaii, California and Massachusetts had median sales prices above $400,000 this summer, the highest in the nation, while annual home price growth slowed steadily between June and September in these three states. When comparing September 2018 to September 2017, annual price appreciation slowed more in these states than in the U.S. overall. Nationally, annual price growth slowed 0.5 percentage points. However, in Hawaii, California and Massachusetts growth rates decreased by 1.7, 0.7 and 1.0 percentage points, respectively.

Including distressed sales, home prices rose the most year over year in Nevada (12.8%) and Idaho (11.9%).

Through September, 38% of the top 100 metropolitan areas were overvalued, 19% were undervalued and 43% were at value. When looking at only the top 50 markets based on housing stock, 46% were overvalued, 14% were undervalued and 40% were at value. CoreLogic defines an overvalued housing market as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level.

Among U.S. metro areas, Las Vegas has posted the largest year-over-year index gain, up 13.4%. Seattle is up 9.9% with Denver (7.2%), Los Angeles (7.1%) and San Diego (5.2%) rounding out the top five.

See CoreLogic’s September report for more detail.

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