Over the weekend, I posted some questions for next year: Ten Economic Questions for 2016. I’ll try to add some thoughts, and maybe some predictions for each question.
Here is a review of the Ten Economic Questions for 2015.
7) House Prices: It appears house prices – as measured by the national repeat sales index (Case-Shiller, CoreLogic) – will be up about 5% or so in 2015 (after increasing 7% in 2012, 11% in 2013, and 5% in 2014 according to Case-Shiller). What will happen with house prices in 2016?
The following graph shows the year-over-year change in the seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).
Click on graph for larger image.
The Composite 10 SA was up 5.1% compared to October 2014, the Composite 20 SA was up 5.6% and the National index SA was up 5.2% year-over-year. Other house price indexes have indicated similar gains (see table below).
Although I mostly use Case-Shiller, I also follow several other price indexes. The following table shows the year-over-year change for several house prices indexes.
| Year-over-year Change for Various House Price Indexes | ||
|---|---|---|
| Index | Through | Increase |
| Case-Shiller Comp 20 | Oct-15 | 5.6% |
| Case-Shiller National | Oct-15 | 5.2% |
| CoreLogic | Oct-15 | 6.8% |
| Zillow | Oct-15 | 4.3% |
| Black Knight | Sept-15 | 5.1% |
| FNC | Oct-14 | 5.9% |
| FHFA Purchase Only | Oct-15 | 6.1% |
There were some special factors in 2012 and 2013 that led to sharp price increases. This included limited inventory, fewer foreclosures, continued investor buying in certain areas, and a change in psychology as buyers and sellers started believing house prices had bottomed. In some areas, like Phoenix, there appeared to be a strong bounce off the bottom, but that bounce mostly ended in 2014.
Currently investor buying has slowed, as have distressed sales – however inventory is still low in many areas. In 2016, inventories will probably remain low, but I expect inventories to increase on a year-over-year basis.
Low inventories, and a decent economy suggests further price increases in 2016. However I expect we will see prices up less in 2016, than in 2015, as measured by these house price indexes – mostly because I expect more inventory.