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Zillow Research

As Predicted, Case-Shiller Continued to Decline in November, Index Weaker Than Expected

This Tuesday, the S&P/Case-Shiller Home Price Indices showed that the non-seasonally adjusted November 10- and 20-City Composite declined 3.6% and 3.7% on a year-over-year basis, a sharper decline than what was anticipated in Zillow’s forecast, which we released last week. On a seasonally adjusted monthly basis, the 10- and 20-City Composites fell 0.7% from October to November. The table below shows how our forecast compared with the actual numbers.

While the Zillow Case-Shiller Forecasts have been very accurate in the past – our median average error is displayed in the table below – we ended up on the bullish side this month. Our forecasting model incorporates previous data points of the Case-Shiller series, as well as Zillow Home Value Index data and national foreclosure resales. As we had mentioned in our initial forecast blog post, the Case-Shiller indices are experiencing the bulk of 2011 home price depreciation in the last quarter of the year. Therefore, the previous data points offered little information for our forecast this month. In addition, contrary to the trend displayed by the Case-Shiller, the Zillow Home Value Index’s (ZHVI) pace of depreciation has slowed dramatically since the start of this year and was essentially flat in November. These factors contributed to a lower predicted depreciation rate for the Case-Shiller 10- and 20-City Composite indices.

“November was a bit of surprise to the downside in terms of Case-Shiller home prices, and unfortunately downside surprises haven’t been that uncommon in recent years,” said Zillow Chief Economist Dr. Stan Humphries. “Some but not all of this strong monthly depreciation can be chalked up to the fact that foreclosure re-sales, which the Case-Shiller index includes, represented a larger share of sales in November than October. But even adjusting for the impact of more foreclosures in the month, this latest price signal indicates a continued weak housing market that still hasn’t yet reached bottom.”

To see how Zillow’s forecast of the October Case-Shiller indices compared, see our blog post from last month.

As Predicted, Case-Shiller Continued to Decline in November, Index Weaker Than Expected