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Question #8 for 2018: What will happen with house prices in 2018?


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).

Case-Shiller House Prices IndicesClick 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?
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