On December 20 Zillow released its December 2011 Home Price Expectations Survey results. This survey (formerly called the MacroMarkets Home Price Expectation Survey) is 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 the residential real estate market, as depicted by the Case-Shiller US National Home Price Index (NSA), will slowly climb (on a cumulative basis) through 2016.
The survey detail is interesting. Of the 109 survey respondents, 9 (of the displayed responses) foresee a cumulative price decrease through 2016; and of those 9, only 3 foresee a double-digit percentage cumulative price drop. Mark Hanson remains the most “bearish” of the survey participants with a forecast of a 25.17% cumulative price decline through 2016.
The Median Cumulative Home Price Appreciation for years 2011-2016 is seen as -2.00%, -1.99%, .29%, 3.01%, 6.96%, and 10.63% respectively.
For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Mark Hanson’s above-referenced forecast) will prove too optimistic in hindsight. Although a 25.17% 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 titled "What's Ahead For The Housing Market - A Look At The Charts."
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1265.33 as this post is written