Buckle up, folks. If you thought the Case-Shiller numbers out this morning for March were eye-popping, just wait until next month. Our updated forecast indicates that the April 20-City Composite Case-Shiller Home Price Index (non-seasonally adjusted [NSA]) will rise 12.1 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will increase 11.4 percent from year-ago levels. The seasonally adjusted (SA) month-over-month change from March to April will be 1.7 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 April will not be released until Tuesday, June 25. The April Zillow Home Value Index (ZHVI) was published last week.
As we’ve described , 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 April 2013 up 5.2 percent from year-ago levels. We expect home value appreciation to continue to moderate in 2013, rising only 4 percent between April 2013 and April 2014. Further details on our forecast of home values can be found here, and more on Zillow’s full April 2013 report can be found here.
To get some sense of where the Case-Shiller Composite-20 index will go over the coming years, the chart below combines 1) the historical trajectory of the index; 2) next month’s forecast based on current Zillow data; and 3) the mean expectation for real estate appreciation over the next five years, based on the Zillow Home Price Expectations Survey, which includes input from more than 100 economists. These panelists actually predict the five-year path of the ZHVI, not the Case-Shiller index, but the future expectations are interesting nonetheless when applied to the current Case-Shiller index levels.
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.