November Case-Shiller Results and December Forecast: Unseasonably Strong Demand

Demand from home buyers was unseasonably strong in the final months of 2017 – even in the face of full holiday schedules, low inventory, high competition and rising home prices – helping to push headline Case-Shiller indices somewhat higher than expected in November.

The seasonally adjusted 10-city, 20-city and U.S. National Case-Shiller indices all grew by more than expected in November, up 0.8 percent, 0.7 percent and 0.7 percent, respectively, from October. The indices were all also up year-over-year, by 6.1 percent, 6.4 percent and 6.2 percent, respectively.

This buying demand will stay hot as the nation’s large and aging millennial population continues to pivot toward homeownership as they establish careers, partner up and begin starting families. But what’s been missing from the housing mix so far is homes actually available to buy in numbers sufficient enough and at prices accessible enough to meaningfully meet this red hot demand. High demand and low supply has been a longstanding trend in the housing market. Looking ahead, year-over-year and monthly growth in the December Case-Shiller headline indices is expected to closely mirror growth rates exhibited in November. December 2017 Case-Shiller data is scheduled for release on Tuesday, Feb. 27.

But there are signs this ongoing lack of housing inventory may be beginning to shift. Inventory of newly built homes for sale crept up at the end of 2017, to the highest level since April 2009. And while home prices in general continue to rise past record highs, new home prices are growing at a much slower annual pace than overall home values, a sign that builders at least seem to be trying to keep costs in check. More supply will be critical to the continued health of the housing market going forward, as demand from home buyers is very unlikely to fade over the next year and beyond.