MARKET TRENDS UP: Zillow Forecast: August Case-Shiller Expected to Show 1.7% Increase

Zillow's Chief Economist, Dr. Stan Humphries, forecasts what we’ll see from the Case-Shiller Composite Home Price Indices one week in advance of the report. Next Tuesday, Case-Shiller is releasing their indices for August and Dr. Humphries is predicting modest appreciation in home prices as the housing market recovery continues. His full forecast can be found below …..

On Tuesday Oct. 30, the Case-Shiller Composite Home Price Indices for August will be released. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will be up by 1.7 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will be up 1.2 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from July to August will be 0.2 percent for the 20-City Composite and 0.3 percent for the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series, the August Zillow Home Value Index data and national foreclosure re-sales.

As the housing market recovery continues, home prices are expected to modestly appreciate, with growth rates being below “normal” pre-housing recession levels. Zillow’s Home Value Index for September was released on Monday night and shows the largest quarterly appreciation since March 2006, showing that the market is regaining some of its strength. National home values are up 3.2 percent from year-ago levels and have now seen four consecutive quarters of appreciation. While the national housing market is showing consistent signs of improvement, the recovery is uneven across the country. Some markets, such as Phoenix, Riverside and Miami are doing exceptionally well, while St. Louis and Atlanta are still faltering. Part of the strong home value appreciation we are seeing is driven by acute inventory shortages in many markets with foreclosures and foreclosure re-sales down and many people still locked up in negative equity, limiting overall supply. In these last months of 2012, Case-Shiller indices are expected to moderate and likely report monthly declines toward the end of the year tracking the Zillow Home Value Index. Monthly depreciation toward the end of the year is largely a function of declining overall monthly sales volume, which will increase the percentage of foreclosure re-sales in the transactional mix being tracked by Case-Shiller.

The chart below shows the Case-Shiller 20-City Composite Index (NSA) forecasted five years into the future. We’ve extended the 20-City Index with the Zillow forecast for year-over-year growth in the national Case-Shiller Home Price Index (since the 20-City and national indices track each other very closely). Our Case-Shiller National forecast is based on the September 2012 Zillow Home Price Expectations Survey, administered by Pulsenomics, which surveys more than 100 professional forecasters quarterly to forecast the Case-Shiller National Home Price Index for the next five years. The survey results were released on Sept. 20 and show that

forecasters are much more optimistic compared to prior surveys. See our results here. Zillow anticipates the Case-Shiller National Index to be up by 3 percent in December 2012 compared to December 2011.

Zillow’s September 2012 data can be found here. The Zillow Home Value Index does not include foreclosure re-sales, and we expect it to increase 1.7 percent between September 2012 and September 2013.