The Case-Shiller (CS) National Home Price Index, reported by S&P Dow Jones Indices, slowed to a 9.8% seasonally adjusted annual growth rate in December, from 10.4% in November. The Home Price Index from the Federal Housing Finance Agency (FHFA) rose at a seasonally adjusted annual rate of 5.5% in December, following 7.1% in November.
House price appreciation is largely driven by existing home sales and inventory. An acceleration in home sales, without a comparable rise in inventory, will put upward pressure on prices. Existing home sales have been fluctuating over the past year, particularly with interest rate expectations. Correspondingly, house price appreciation has experienced some volatility.
After a sharp decline in November and a reacceleration in December, existing home sales increased moderately in January. We expect a slowdown in the growth rate of sales will cause house price appreciation to settle to a more sustainable pace in 2016 and 2017.