Zillow Forecast: October Case-Shiller Composite-20 Expected to Show 4.1% Increase from One Year Ago

Posted by: Stan Humphries    Tags:      Posted date:  December 14, 2012  

On Wednesday December 26th, the Case-Shiller Composite Home Price Indices for October will be released. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will be up by 4.1 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will be up 3.1 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from September to October will be 0.3 percent for the 20-City Composite and 0.1 percent for the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series, the October Zillow Home Value Index data and national foreclosure re-sales.

As we had previously discussed, monthly appreciation has slowed and will eventually turn negative in the last months of 2012. This slowdown is in large part due to Case-Shiller’s mix of distressed and non-distressed properties in the same index, as they include foreclosure re-sales. As the market slows down a bit and fewer homes are listed, foreclosure re-sales will make up a larger part of the transactional mix and will therefore skew the Case-Shiller Indices to be more negative. Despite this slowdown, home values are still higher this year than they were at this same time last year.

To forecast the Case-Shiller indices we use past data from Case-Shiller, as well as the Zillow Home Value Index (ZHVI), which is available a month in advance of Case-Shiller numbers, paired with foreclosure re-sale numbers, which we also have available a month in advance. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices. The ZHVI does not include foreclosure re-sales and has been appreciating for 12 consecutive months and we predict that it will continue to appreciate over the next year at a rate of 1.5 percent from October 2012 to October 2013. Further details on our forecast can be found here.

Zillow’s October 2012 data can be found here, November data will be released next week. The December 2012 edition of the Zillow Home Price Expectations Survey, administered by Pulsenomics, which surveys more than 100 professional forecasters quarterly to forecast the Case-Shiller National Home Price Index for the next five years, will also be released next week and will provide long term insight into where the Case-Shiller National Index will be headed.

About the author
Stan Humphries
Stan is Zillow's Chief Economist. To learn more about Stan, click here.