by Calculated Risk on 12/26/2014 12:12:00 PM

Earlier I posted some questions for next year: Ten Economic Questions for 2015. I'll try to add some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2014.

7) House Prices: 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 2014 (after increasing about 12% nationally in 2013). What will happen with house prices in 2015?

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 4.9% compared to September 2013, the Composite 20 SA was up 4.9% and the National index SA was up 4.8% year-over-year.  Other house price indexes have indicated similar gains (see table below).

Although I use Case-Shiller, I also use several other price indexes. The following table shows the year-over-year change for several house prices indexes.  The year-over-year price increases slowed in 2014, but the slowdown is probably mostly over (I don't expect prices to go negative year-over-year).

Year-over-year Change for Various House Price Indexes
Index	Through	Increase
Case-Shiller Comp 20	Sept-14	4.9%
Case-Shiller National	Sept-14	4.8%
CoreLogic	Oct-14	6.1%
Zillow	Oct-14	6.4%
Black Knight	Sept-14	4.6%
FNC	Oct-14	5.7%
FHFA Purchase Only	Sept-14	4.5%

Some of the key factors in 2012 and 2013 were limited inventory, fewer foreclosures, 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 bounce off the bottom - but that bounce appears to have ended in 2014.  The investor buying has slowed - as have distressed sales.

The consensus of housing analysts appears to be for price increases of around 3.5% in 2015.

In 2015, inventories will probably remain low, but I expect inventories to continue to increase on a year-over-year basis.  Low inventories, and a better economy (with more consumer confidence) suggests further price increases in 2015.  I expect we will see prices up mid single digits (percentage) in 2015 as measured by these house price indexes.

Here are the ten questions for 2015 and a few predictions:
• Question #2 for 2015: How many payroll jobs will be added in 2015?
• Question #3 for 2015: What will the unemployment rate be in December 2015?
• Question #4 for 2015: Will too much inflation be a concern in 2015?
• Question #5 for 2015: Will the Fed raise rates in 2015? If so, when?
• Question #6 for 2015: Will real wages increase in 2015?
• Question #7 for 2015: What about oil prices in 2015?
• Question #8 for 2015: How much will Residential Investment increase?
• Question #9 for 2015: What will happen with house prices in 2015?
• Question #10 for 2015: How much will housing inventory increase in 2015?