Zillow Q1 2018 Home Price Expectations Survey – Summary & Comments

On February 20, 2018, the Zillow Q1 2018 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An excerpt from the press release:

The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 housing experts and economists about their expectations for home price growth, and whether tax reform affected these predictions.

When asked how the new tax law impacted their five-year forecast for home values in the U.S., 41 percent of respondents said their overall housing outlook is now more pessimistic, while 31 percent of the panelists had a more optimistic view as a result of the tax reform. The remaining 28 percent of respondents said that tax reform did not change their outlook.

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Various Q1 2018 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 Q1 2018 Home Price Expectations Survey (pdf) is interesting.  Of the 105 survey respondents, only three (of the displayed responses) forecasts a cumulative price decrease through 2022, and none of those forecasts is for a double-digit percentage decline.   The largest decline is seen as a 4.5% cumulative price decrease through 2022.

The Median Cumulative Home Price Appreciation for years 2018-2022 is seen as 5.00%, 9.10%, 12.49%, 15.85%, and 19.33%, respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in the 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 2701.33 as this post is written