Earlier I posted some questions for next year: Ten Economic Questions for 2018. I’ll try to add some thoughts, and maybe some predictions for each question.
8) House Prices: It appears house prices – as measured by the national repeat sales index (Case-Shiller, CoreLogic) – will be up over 6% in 2017. What will happen with house prices in 2018?
The following graph shows the year-over-year change through October 2017, in the seasonally adjusted Case-Shiller 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 6.0% compared to October 2016, the Composite 20 SA was up 6.4% and the National index SA was up 6.2% 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-17 | 6.4% |
| Case-Shiller National | Oct-17 | 6.2% |
| CoreLogic | Oct-17 | 7.0% |
| Black Knight | Oct-17 | 6.5% |
| FHFA Purchase Only | Oct-17 | 6.6% |
Most analysts are forecasting house prices will increase in the 4% to 6% range in 2017.
The key will be inventories. If inventories stay at the current level, or fall further, house prices will probably increase in the mid-to-high single digits in 2018. If inventories increase a little (my expectation), then prices will probably increase in the low-to-mid single digit.
Perhaps the new tax law will lead to more inventory and less appreciation. Or perhaps higher mortgage rates will slow price appreciation.
If inventory increases year-over-year as I expect by December 2018, it seems likely that price appreciation will slow to the low-to-mid single digits.
Here are the Ten Economic Questions for 2018 and a few predictions:
• Question #8 for 2018: What will happen with house prices in 2018?
• Question #9 for 2018: Will housing inventory increase or decrease in 2018?
• Question #10 for 2018: Will the New Tax Law impact Home Sales, Inventory, and Price Growth in Certain States?