by Calculated Risk on 6/28/2013 02:19:00 PM

The Case-Shiller house price indexes for May will be released Tuesday, July 30th. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close. Note: Zillow makes a strong argument that the Case-Shiller index is currently overstating national house price appreciation.

Zillow Predicts Another 12% Annual Increase in Case-Shiller Indices for May

The Case-Shiller data for April came out [Tuesday] and, based on this information and the May 2013 Zillow Home Value Index (released last week), we predict that next month’s Case-Shiller data (May 2013) will show that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) increased 12.1 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) increased 12.2 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from April to May will be 1.3 percent for the 20-City Composite and 1.6 percent for the 10-City Composite Home Price Indices (SA).
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The Case-Shiller indices are giving an inflated sense of national home value appreciation because they are biased toward the large, coastal metros currently seeing such enormous home value gains, and because they include foreclosure resales. The inclusion of foreclosure resales disproportionately boosts the index when these properties sell again for much higher prices — not just because of market improvements, but also because the sales are no longer distressed. In contrast, the ZHVI does not include foreclosure resales and shows home values for May 2013 up 5.4 percent from year-ago levels. We expect home value appreciation to continue to moderate in 2013, rising only 4.1 percent between May 2013 and May 2014. Further details on our forecast of home values can be found here, and more on Zillow’s full May 2013 report can be found here.

To forecast the Case-Shiller indices, we use the March Case-Shiller index level, as well as the April Zillow Home Value Index (ZHVI), which is available more than a month in advance of the Case-Shiller index, paired with April foreclosure resale numbers, which Zillow also publishes more than a month prior to the release of the Case-Shiller index. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices.

The following table shows the Zillow forecast for the May Case-Shiller index.

Zillow May Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	May 2012	151.75	152.67	139.2	140.06
Case-Shiller (last month)	Apr 2013	165.63	168.76	152.37	155.37
Zillow Forecast	YoY	12.2%	12.2%	12.1%	12.1%
	MoM	2.8%	1.6%	2.4%	1.3%
Zillow Forecasts1		170.3	171.4	156.0	157.2
Current Post Bubble Low		146.46	149.55	134.07	136.85
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		16.3%	14.6%	16.4%	14.9%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts