Zillow Q4 2017 Home Price Expectations Survey – Summary & Comments

On December 5, 2017, the Zillow Q4 2017 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An excerpt from the press release:

Panelists views on the pace of home value growth have consistently grown over the past several quarters, likely because of low mortgage rates spurring demand and low inventory constricting supply – a recipe for rapid home value growth that has been in place for the past several years. On average, panelists said they expect home values to end this year up 5.6 percent from the end of 2016 (as of October 2017, median U.S. home values were up 6.5 percent year-over-year. Panelists said they expected home values to end 2018 up 4.13 percent from the end of this year, on average. At the end of 2016, the same panelists said they expected home values to end 2017 up 3.61 percent and 2018 up just 2.97 percent year-over-year, on average.

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Various Q4 2017 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 2017 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only two (of the displayed responses) forecasts a cumulative price decrease through 2022, and only one of those forecasts is for a double-digit percentage decline.  That forecast is from Mark Hanson, who foresees a 20.52% cumulative price decrease through 2021.

The Median Cumulative Home Price Appreciation for years 2017-2022 is seen as 5.60%, 10.25%, 13.65%, 17.13%, 20.55%, and 24.34%, 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 2629.20 as this post is written