Expect Recent Trend of Sub-5% Annual Growth in Case-Shiller to Continue into 2015

The November S&P/Case-Shiller (SPCS) data released this morning showed a slight uptick in the pace of national home value appreciation in the housing market, with annual growth in the U.S. National Index rising to 4.7 percent, from 4.6 percent in October.

Despite the modestly faster pace of growth, annual appreciation in home values as measured by SPCS has been less than 5 percent for the past three months. We anticipate this trend to continue as annual growth in home prices slows to more normal levels between 3 percent and 5 percent. Zillow predicts the U.S. National Index to rise 4.5 percent on an annual basis in December.

The 10- and 20-City Indices saw annual growth rates decline in November; the 10-City index rose 4.2 percent and the 20-City Index rose 4.4 percent – down from rates of 4.4 percent and 4.5 percent, respectively, in October.

The non-seasonally adjusted (NSA) 20-City index fell 0.2 percent from October to November, and we expect it to decrease 0.4 percent in December from November. We expect the same monthly decline in the 10-City Composite Index next month, falling 0.4 percent from November to December (NSA).

All forecasts are shown in the table below. These forecasts are based on the November SPCS data release and the December 2014 Zillow Home Value Index (ZHVI), released Jan. 22. Officially, the SPCS Composite Home Price Indices for December will not be released until Tuesday, Feb. 24.

This month’s (November) SPCS release shows increases month-over-month for the seasonally adjusted composite series, while on a non-seasonally adjusted basis, both series fell. The Zillow Home Value Index was up 6.6 percent year-over-year in December. Zillow data shows the annual home value appreciation rate has fallen every month since April, and we expect this slowdown to continue throughout 2015. The December Zillow Home Value Forecast calls for a 3 percent rise in home values through December 2015, less than half the current rate of appreciation. Further details on our forecast of home values can be found here, and more on Zillow’s full December 2014 report can be found here.

More on the differences between SPCS and ZHVI can be found here. Our commentary on the revisions to the national S&P/Case-Shiller Index can be found here.