Zillow Q4 2014 Home Price Expectations Survey – Summary & Comments

On November 11, 2014, the Zillow Q4 2014 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

Two excerpts from the Press Release:

• More than 100 experts predict U.S. home values to end 2014 up an average of 4.8 percent from 2013, to a median home value of $176,760.
• Almost 90 percent of respondents with an opinion expect the housing market to fully normalize within five years.
• In the longer term, panelists are most concerned by would-be first-time buyers in a weak financial position and demographic changes affecting the housing market.

Home values will end 2014 up 4.8 percent year-over-year, and will gain another 23.5 percent in value, cumulatively, through 2019, according to results of the latest Zillow Home Price Expectations Survey.

also:

The panelists said they expect home values to appreciate between 3 and 4 percent annually over the next five years, on average, slowing to an annual rate of 3.2 percent in 2019. Nationally, the median home value is currently $176,500, according to the 2014 Q3 Zillow Real Estate Markets Report, and is projected to cross the $200,000 threshold in September 2018. Home values are expected to rise above their 2007 peak of $196,400 in February 2018.

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Various Q4 2014 Zillow Home Price Expectations Survey charts are available, including that seen below:

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q4 2014 Home Price Expectations Survey (pdf) is interesting.  Of the 107 survey respondents, only one (of the displayed responses) forecasts a cumulative price decrease through 2019; and even that one does not foresee a double-digit percentage cumulative price drop.  That forecast is from Mark Hanson’s prediction, which foresees a 6.83% cumulative price decrease through 2019.

The Median Cumulative Home Price Appreciation for years 2014-2019 is seen as 5.00%, 8.99%, 12.48%, 15.86%, 19.33%, and 22.91%, 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.  From a longer-term historical perspective, such a decline is very mild 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.”

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2036.10 as this post is written