The Case-Shiller Composite Home Price Indices for November will be released on Tuesday, Jan. 31. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted, NSA) will decline by 3.2 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will show a year-over-year decline of 2.7 percent. The seasonally adjusted (SA) month-over-month change from October to November will be -0.2 percent and -0.1 percent for the 20 and 10-City Composite Home Price Index (SA), respectively. All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series and the November Zillow Home Value Index data, and national foreclosure resales.
The Case-Shiller indices are experiencing the bulk of 2011 home price depreciation in the last quarter of the year. This is somewhat contrary to the trend displayed by the Zillow Home Value Index (ZHVI), where the pace of depreciation has slowed dramatically since the start of this year. The November Zillow Real Estate Market Reports, released on Tuesday, Jan. 10, showed home values remained essentially flat from October to November falling only 0.1 percent, representing a 4.6 percent decline on a year-over-year basis. Possible reasons for this difference could be the ZHVI’s exclusion of foreclosures or a larger geographic footprint. While home values are expected to fall further (another 2 to 4 percent) in 2012 with a definitive bottom probably a year away, encouraging precursors to a true stabilization of home values are falling into place as the new year begins. Home sales will show a more consistent upward trend this year, slowly reducing the amount of vacant housing inventory. This increased demand will eventually start to put a floor under home values later this year.
Our monthly Case-Shiller forecast is in line with the Zillow Home Price Expectations Survey administered by Pulsenomics, which surveys over 100 economists quarterly to forecast the Case-Shiller National (NSA) Home Price Index (HPI) for the next 5 years. In our inputs to this consensus survey, Zillow tends to be a bit more bearish in our outlook than the average of the economists surveyed. The latest median expectation across all economists was for the Case-Shiller National HPI to fall by 1.97 percent between Q4 2010 and Q4 2011, whereas Zillow expects the index to fall by 3.5 percent over the period. Moreover, we foresee another 1 percent decline in the national HPI between Q4 2011 and Q4 2012. The chart below shows the Case-Shiller 20-City Composite HPI (NSA). To give some idea of future projections, we’ve extended the 20-City HPI with the Zillow forecast for year-over-year growth in the national Case-Shiller HPI (since the 20-City and national HPIs track each other very closely).