The Case-Shiller Composite Home Price Indices for August will be released next Tuesday, the 25^th of October. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted, NSA) will decline by 3.7% on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will show a year-over-year decline of 3.4%. The seasonally adjusted (SA) month-over-month change from July to August will be -0.3% and -0.2% for the 20 and 10-City Composite Home Price Index (SA), respectively. All forecasts are shown in the table below and are based on previous data points of the Case-Shiller series, as well as the Zillow Home Value Index.

This forecast is in line with what Zillow has been predicting for the last few months. After showing monthly appreciation earlier this year and building some momentum, recent weak economic data is starting to be reflected in home values. Existing home sales have been disappointing, with September sales down 3% from August (even though August existing home sales were better than expected). While the September jobs report beat expectations, it still remained relatively weak. Moreover, consumer confidence, which dipped to post-recession lows in August, remained low in September. We expect to see continued home value depreciation as unemployment and negative equity remain high. The large foreclosure pipeline will produce relatively low priced REOs in the market putting downward pressure on prices going forward, and we do expect the pace at which homes exit this pipeline to pick up in the near-term.

The Macro Markets Home Price Survey performed by Pulsenomics surveys over 100 economists to forecast the Case-Shiller 20-City Composite Home Value Index for the next 5 years. In my most recent input to this consensus survey, I was a bit more bearish in my outlook than the average of the 111 economists surveyed. The median expectation across all economists was for the Case-Shiller 20-City Composite Home Price Index to fall by 2.8% between Q4 2010 and Q4 2011 whereas Zillow expects this index to fall by 4.5% over the period. We foresee another 2.5% decline between Q4 2011 and Q4 2012, as shown on the graph below.