Thursday, June 23, 2011

MacroMarkets June 2011 Home Price Expectations Survey

On June 22 MacroMarkets released its June 2011 Home Price Expectations Survey (pdf) results.  This Survey is now done on a quarterly basis.

The accompanying chart is seen below:

(click on chart image to enlarge)



As one can see from the above chart, the average expectation is that not only has the residential real estate market (nearly) hit a “bottom” as far as pricing; but that steady yet mild appreciation will occur through 2015.

The survey detail (pdf) is interesting.  Of the 100+ survey respondents, 18 (of the displayed responses) foresee a cumulative price decrease through 2015; and of those 18, only three, Gary Shilling, John Brynjolfsson, and Anthony Sanders foresee a double-digit percentage cumulative price drop.  Gary Shilling remains the most “bearish” of the survey participants with a forecast of a 19.68% cumulative price decline through 2015.

The Median Cumulative Home Price Appreciation for years 2011-2015 is seen as -3.10%, -2.22%, -.15%, 2.94%, and 6.72% respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Gary Shilling’s above-referenced forecast)  will prove too optimistic in hindsight.  Although a 19.68% decline is substantial, from a longer-term historical perspective such a decline is rather tame in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, (even) from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post.
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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1292.89 as this post is written

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