December Case-Shiller Results & January Forecast: Back on the Gas

• The S&P CoreLogic Case-Shiller U.S. National Home Price Index® rose 3.8% year-over-year in December (non-seasonally adjusted), up from 3.5% in November. Annual growth was also up from November in the smaller 10-city index (to 2.4%, from 2%) and in the 20-city index (to 2.9%, from 2.5%).
• Phoenix (+6.5%), Charlotte (+5.3%) and Tampa (+5.2%) reported the highest year-over-year gains among markets in the 20-city index.

The final reading of 2019 confirmed that a reacceleration of home price growth has indeed begun, after growth spent nearly the entire calendar year tapping on the brakes.

The national Case-Shiller Home Price Index rose 3.8% year-over-year in December. The smaller 10- and 20-city composite indices grew more slowly, at 2.4% and 2.9% year-over-year, respectively. The annual rate of growth was higher in December than in November in all three indices. On a monthly (seasonally adjusted) basis, the 10- and 20-city indices were each up 0.4% from November to December; the national index was up 0.5% month-over-month.

Index	Zillow Forecast, Released 1/28/20	Actual Case-Shiller Indices, Released 2/25/20	Historical Median Absolute Error*
10-City Composite, Month-Over-Month (SA)	0.3%	0.4%	0.2%
10-City Composite, Year-Over-Year (NSA)	2.7%	2.4%	0.2%
20-City Composite, Month-Over-Month (SA)	0.4%	0.4%	0.2%
20-City Composite, Year-Over-Year (NSA)	3.2%	2.9%	0.1%
U.S. National Month-Over-Month (SA)	0.4%	0.5%	0.1%
U.S. National Year-Over-Year (NSA)	4.1%	3.8%	0.1%
*Calculation of Median Absolute Errors are based on Zillow’s forecasts dating to 2011.  The national Case-Shiller forecasts began in 2014.

For-sale inventory remains near its lowest level on record, which has stoked competition for the relatively few homes on the market and nudged prices back upward as a result. The rebound in home price growth is also rooted in the sustained strength of the U.S. economy, which continues to ride a robust labor market, and mortgage rates that finished the year near their lowest levels since 2016 and have fallen even further since.

But while the increased competition should bring greater returns for sellers in the short term, the shortage of homes on the market also presents a significant challenge to the industry going forward. Home sales pulled back only slightly in January – less than many experts anticipated – but the retreat may set the stage for a larger step backward in volume in the coming months. Should inventory fail to bounce back in a meaningful way, home prices may accelerate to an unsustainable level, and ultimately discourage buyers (and sellers) from entering the market altogether.

The headline is welcome news, but this long-awaited reacceleration of home prices does come with some strings attached.

Annual growth in January as reported by Case-Shiller is expected to accelerate in all three major indices. S&P Dow Jones Indices is expected to release data for the January S&P CoreLogic Case-Shiller Indices on Tuesday, March 31.

Index	Actual December Case-Shiller Change	Zillow’s Forecast for the Case-Shiller January Indices
10-City Composite, Month-Over-Month (SA)	0.4%	0.4%
10-City Composite, Year-Over-Year (NSA)	2.4%	2.8%
20-City Composite, Month-Over-Month (SA)	0.4%	0.4%
20-City Composite, Year-Over-Year (NSA)	2.9%	3.2%
U.S. National Month-Over-Month (SA)	0.5%	0.4%
U.S. National Year-Over-Year (NSA)	3.8%	4.0%

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