Zillow Q2 2016 Home Price Expectations Survey – Summary & Comments

On May 18, 2016, the Zillow Q2 2016 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

Two excerpts from the Press Release:

Overall, the economists surveyed predicted home price appreciation would be up 4 percent year-over-year at the end of 2016, higher than predictions of 3.7 percent indicated in the previous survey. However, if Sanders or Trump is elected, the economists would lower their expectations both for home values and the overall performance of the U.S. economy.

also:

"Longer-term expectations for U.S. home values continue to trend slowly downward, and are at the lowest levels they've been since the market recovery began four years ago," said Pulsenomics founder Terry Loebs. "After adjusting for expected inflation, the expert panel's forecast for national home value appreciation averages 1.7 percent annually through 2020." Although this would mark a significant pull-back from the 3.6 percent inflation-adjusted average annual rate experienced since the start of the recovery in 2012, Loebs said that housing market stakeholders should keep the fading optimism in perspective. "During most of the decade that preceded the onset of the real estate bubble more than fifteen years ago–a relatively normal period for the U.S. housing market–nominal home values didn't even keep up with inflation."

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Various Q2 2016 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 Q2 2016 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only one (of the displayed responses) forecasts a cumulative price decrease through 2020.  That forecast is from Mark Hanson, who foresees a 14.77% cumulative price decrease through 2020.

The Median Cumulative Home Price Appreciation for years 2016-2020 is seen as 4.00%, 7.64%, 11.14%, 14.31%, and 17.97%, 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, 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 2047.63 as this post is written