February 25, 2014

FORTUNE — The housing market hasn’t been chilled by winter weather, according to data released Tuesday from the S&P/Case-Shiller Home Price index.

Home prices rose 11.3% nationally in December 2013 from a year earlier, matching the index’s “best year since 2005,” according to David Blitzer, chairman of the Index Committee at S&P Dow Jones indices.

But keep in mind that because the Case-Shiller index lags by two months, the index isn’t measuring the same time period as recent data like housing starts, builder confidence, and mortgage applications, all of which suggest the housing recovery may be slowing.

Furthermore, Tuesday’s data shows that while year-over-year price increases remain significant, the month-to-month increases show that the rise in home prices is slowing. According to Blitzer, “the strongest part of the recovery in home values may be over.”

MORE: Is the housing recovery losing steam?

The other thing to keep in mind is that home price appreciation has lately been driven more by a lack of supply than a surge in demand. Bill McBride of Calculated Risk has been closely tracking the issue, and he writes:

There are several reasons inventory has been low: a) Most of the recent investor buying has been “buy-to-rent” and these investors aren’t selling … b) [It is] difficult for people who are underwater (negative equity) to sell, c) Seller psychology: When the expectation is that prices will fall further, marginal sellers will try to sell their homes immediately. And marginal buyers will decide to wait for a lower price. This leads to more inventory on the market. But when the expectation is that prices are stabilizing (the current situation), sellers will wait until it is convenient to sell. d) Low inventory can keep some potential sellers from listing their homes because they can’t find a move-up home to buy.

By this logic, one should assume that this lack of demand will correct itself. Higher prices should draw more people out of “underwater” status, and slowing home price appreciation will convince the marginal home seller to get his home on the market before the party is over. This suggests that while home prices might rise more slowly than they did in 2013, we can expect a healthier and more balanced real estate market going forward.

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