by Calculated Risk on 2/25/2014 06:45:00 PM

The Case-Shiller house price indexes for December were released today. Zillow has started forecasting Case-Shiller a month early - and I like to check the Zillow forecasts since they have been pretty close.  

It looks like the year-over-year change for Case-Shiller is still strong, but slowing. In January 2013, the Composite 20 seasonally adjusted index was up 0.8% (a 10% annual rate), and is forecast to be up "only" 0.5% in January 2014 (a 6% annual rate).

From Zillow: Case-Shiller Indices Show Little Moderation

The Case-Shiller data for December 2013 came out this morning, and based on this information and the January 2014 Zillow Home Value Index (ZHVI, released February 19) we predict that next month’s Case-Shiller data (January 2014) will show that the non-seasonally adjusted (NSA) 20-City Composite Home Price Index and the NSA 10-City Composite Home Price Index increased 13.0 and 13.3 percent on a year-over-year basis, respectively. The seasonally adjusted (SA) month-over-month change from December to January will be 0.5 percent for both the 20-City Composite and the 10-City Composite Home Price Indices (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for January will not be released until Tuesday, March 25.

Case-Shiller indices have shown very little slowing in monthly appreciation, as they continue to show an inflated picture of home prices, especially when considering year-over-year growth. The Case-Shiller indices are biased toward the large, coastal metros currently seeing enormous home value gains, and 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 January 2014 up 6.3 percent from year-ago levels. More on the differences between a repeat sales index, including the Case-Shiller indices, and an imputed hedonic index like the ZHVI can be found here. We expect home value appreciation to continue to moderate in 2014, rising 3.4 percent between January 2014 and January 2015 — a rate much more in line with historic appreciation rates. The main drivers of this moderation include rising mortgage rates and less investor participation – leading to decreased demand – and increasing for-sale inventory supply. Further details on our forecast of home values can be found here, and more on Zillow’s full January 2014 report can be found here.

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

Zillow December Forecast for Case-Shiller Index
		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Jan 2013	158.61	160.50	146.15	148.05
Case-Shiller (last month)	Dec 2013	180.13	180.17	165.69	166.70
Zillow Forecast	YoY	13.3%	13.3%	13.0%	13.0%
	MoM	-0.2%	0.5%	-0.3%	0.5%
Zillow Forecasts1		179.7	182.0	165.2	167.4
Current Post Bubble Low		146.45	149.69	134.07	136.92
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		22.7%	21.6%	23.2%	22.3%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts