SEATTLE, Dec. 5, 2017 /PRNewswire/ -- Housing experts
are increasing their expectations for home price appreciation as
rising prices show no signs of slowing.
Experts expect home prices to climb 4.1 percent in 2018,
according to the 2017 Q4 Zillow® Home Price Expectations
Surveyi, an increase in their expectations for 2018. One
year ago, experts predicted home prices would grow 3 percent in
2018.
The quarterly survey, sponsored by Zillow and conducted by
Pulsenomics LLC, asked more than 100 housing experts, market
strategists, and economists about their expectations for the U.S.
housing market in 2018 and beyond.
The United States is in the
middle of a supply crisis – the number of homes for sale has fallen
on an annual basis for the past 33 straight months. Although
building activity picked up slightly toward the end of the year,
the biggest surprise of the 2017 housing market was the slow pace
of single-family home building, according to the panelists. Only
16.7 percent expect it to change in 2018, a sign that limited
inventory will still be a driving force in the housing market next
year.
Experts believe 2017's low mortgage rates are likely to rise
next year to around 4.5 percent from the current rate of about 3.9
percent. The average 30-year fixed mortgage rate has hovered around
historical lows for years, and is well below the 6 percent rates
seen during the run up to the housing bubble.
"The American labor market is stronger than it's been in decades
and Americans, particularly young Americans, are increasingly
feeling confident enough to buy homes," said Zillow senior
economist Aaron Terrazas. "Home
building has not kept pace with this surge in demand and remains
well below historical norms. We don't expect that these
demand-supply imbalances will fundamentally shift in 2018: Demand
will continue to grow and, though supply should increase somewhat,
we still won't build enough new homes to meet this demand,
contributing to higher prices. Higher mortgage rates will eat into
buyers' budgets, putting even more price pressure on the most
affordable homes for sale. Unless there is a fundamental shift in
the number and type of homes for sale, this is the new normal of
the American housing market."
The panelists were also asked to predict the 30-year fixed
mortgage rate, the homeownership rate, unemployment rate, and real
income growth rate at the end of next year. These are their
expectations:
|
Current
Rate
|
Median
Prediction
|
Low-end Prediction
(25th Percentile)
|
High-end
Prediction (75th Percentile)
|
30-Year Fixed
Mortgage Rate
|
3.92%ii
|
4.50%
|
4.28%
|
4.70%
|
Homeownership
Rate
|
63.9%iii
|
64%
|
63.8%
|
64.2%
|
Unemployment
Rate
|
4.1%iv
|
4.1%
|
4.0%
|
4.4%
|
Real Income
Growth
|
0.7%v
|
1.1%
|
0.9%
|
1.5%
|
Although unusual supply-demand dynamics will likely generate
home value appreciation in the foreseeable future, most experts
believe that the nation-wide rate of increase will diminish. "All
but two of the 108 panelists who responded to this quarter's survey
expect weaker home value growth next year relative to 2017, and
panel-wide, returns are expected to average less than three percent
per year after 2018," said Pulsenomics founder Terry Loebs. "In a low-inflation environment,
nominal housing gains in the three- to four-percent neighborhood
will still create homeowner wealth at a pace exceeding the
pre-bubble norm."
Despite the positive overall outlook concerning home values in
the near-to-intermediate term, disparate views persist within the
panel. "Our most optimistic group of experts projects average
annual home value appreciation of almost 5 percent annually through
the five-year period ending in 2022, while the most pessimistic
group expects an average annual rate of just 1.4 percent," Loebs
said. "I don't foresee a stronger consensus emerging until we have
greater clarity concerning tax reform and the pace of entry-level
home building."
Zillow
Zillow is the leading real estate and rental
marketplace dedicated to empowering consumers with data,
inspiration and knowledge around the place they call home, and
connecting them with the best local professionals who can help. In
addition, Zillow operates an industry-leading economics and
analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of
economists and data analysts produce extensive housing data and
research covering more than 450 markets at Zillow Real Estate
Research. Zillow also sponsors the quarterly Zillow Home Price
Expectations Survey, which asks more than 100 leading economists,
real estate experts and investment and market strategists to
predict the path of the Zillow Home Value Index over the next five
years. Launched in 2006, Zillow is owned and operated by Zillow
Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
Pulsenomics:
Pulsenomics LLC (www.pulsenomics.com) is an independent research
and consulting firm that specializes in data analytics, new product
and index development for institutional clients in the financial
and real estate arenas. Pulsenomics also designs and manages expert
surveys and consumer polls to identify trends and expectations that
are relevant to effective business management and monitoring
economic health. Pulsenomics LLC is the author of The Home Price
Expectations Survey™, The U.S. Housing Confidence Survey, and The
U.S. Housing Confidence Index. Pulsenomics®, The Housing
Confidence Index™, and The Housing Confidence Survey™ are
trademarks of Pulsenomics LLC.
i This edition of the Zillow Home Price Expectations
Survey surveyed 108 experts between October
24-November 6, 2017. The survey was conducted by Pulsenomics
LLC on behalf of Zillow, Inc. and asked the experts about their
expectations for the housing market.
ii Freddie Mac PMMS on Nov. 22,
2017
iii
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
iv https://www.bls.gov/news.release/empsit.nr0.htm
v
https://www.bls.gov/news.release/archives/realer_10132017.pdf
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SOURCE Zillow