The average panel-wide projections mask significant differences of opinion among individual experts who participated in the survey. For example, the most optimistic quartile of panelists expects home values to appreciate at an average annual rate of 4.8 percent through 2023, while the least-confident group projects an average yearly increase of 0.8 percent. Pulsenomics estimates that the difference between those scenarios would amount to $6.5 trillion in national housing wealth. “Such stark differences in the medium-term housing outlook underscore the challenge of assessing the net impact of demographic shifts, market volatility, and supply-demand imbalances lingering in the long wake of the U.S. housing crisis,” Loebs said.
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 Q3 2019 Home Price Expectations Survey is interesting. Of the 100+ survey respondents, only five (of the displayed responses) forecasts a cumulative price decrease through 2023, and only one of those forecasts is for a double-digit percentage decline. The largest decline is seen as a 11.05% cumulative price decrease through 2023.
The Median Cumulative Home Price Appreciation for years 2019-2023 is seen as 3.30%, 6.14%, 8.73%, 12.00%, and 15.02%, 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 far 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.”
The Special Note summarizes my overall thoughts about our economic situation