As expected, annual appreciation in all three main Case-Shiller home price indices accelerated in December, with the U.S. national index climbing at a pace not seen in two and a half years. Home prices as measured by Case-Shiller rose year-over-year in all 20 principal markets covered by the indices.

The U.S. national index rose 5.8 percent year-over-year in December, up from 5.6 percent annual appreciation recorded in November, according to December Case-Shiller data. Annual growth in the 20-city index ticked up from 5.2 percent in November to 5.6 percent in December, while year-over-year growth in the 10-city index rose from 4.4 percent to 4.9 percent over the same period. As of December, the U.S. national index is 0.5 percent above its pre-recession peak set in July 2006, while the 10-city and 20-city indices remain 8.8 percent and 6.7 percent below peaks set at the same time, respectively.

Seasonally adjusted, monthly growth in the smaller 10- and 20-city indices was the same in December as in November, at 0.9 percent. After seasonal adjustment, monthly growth in the larger national index slowed somewhat, from 0.8 percent in November to 0.7 percent in December.

Below are Zillow’s forecasts of December Case-Shiller data, along with the actual December Case-Shiller numbers released today.

Over the last few months, home price growth on the Case Shiller national index has been accelerating and today’s release confirms this trend with all three indices – national, 10 and 20 city – showing a significant pick up in the pace of appreciation. This acceleration speaks to the dynamics on the ground with inventory constraints and high demand outweighing some of the affordability concerns in several markets. However, as mortgage interest rates rise, larger, more expensive markets will continue to become more unaffordable, which will cause home price growth to slow. In particular we expect coastal markets to show slowing price appreciation first, while the country’s more affordable, often inland and somewhat smaller markets – places like Nashville, Milwaukee and Louisville – will continue to see strong price appreciation.