Best Outlook For National And Chicago Area Home Prices In A Decade

This blog post is a bit overdue but I’ve been distracted lately. Last month Zillow and Pulsenomics came out with their 1st Quarter 2021 Home Price Expectations Survey for the nation and the results were a bit more optimistic than we’ve seen in a little more than a decade.
Because this is the first quarter report we’ll need to recalibrate the home price forecast for comparison to the 4th quarter report which covered a longer time period. The 2020 – 2025 cumulative forecast baked into that 4th quarter report worked out to be 18.5%. The new forecast shown below has a 23.4% cumulative forecast, which is significantly higher. That works out to 4.3% per year compounded, which also happens to be the highest annual rate for any forecast since 2010. And also notice that the forecast for 2021 is for 6.2% appreciation. All those higher home price appreciation numbers that the Case Shiller folks keep reporting continue to affect the judgement of the panel of more than 100 real estate experts surveyed.

home price outlook
The forecast for US home prices just keeps getting better and better

Chicago Area Home Price Outlook

So it’s no surprise then really that the “forecast” for Chicago area home prices has similarly improved since the last time I explored this topic. I put “forecast” in quotes because we don’t really have a forecast for the Chicago area but we can study the implied forecast contained within the Case Shiller futures contracts quotes. I got the graph below from  John Dolan of Home Price Futures who is the market maker for these contracts and the implied home price appreciation rate works out to about 3.0% per year. Nothing to write home about and less than what we’ve been realizing for the last few months. But the last few months have been distorted by the unusual circumstances of the pandemic.

Chicago home price forecast
Case Shiller futures prices give us some clue about the forecast for Chicago home prices

How The Pandemic Has Changed Housing Preferences

Speaking of the pandemic…the panelists were also asked for their opinions on how permanent some of the housing preference changes exhibited over the last year would be. The graph below summarizes their responses. They were most in agreement that people would want to continue to work remotely at least some days of the week. There were also significant numbers of panelists who believed that there would be a permanent interest in moving away from large cities and in living a suburban lifestyle.

Housing preference changes
The survey panelists had some interesting perspectives on how permanent the pandemic induced housing preference changes would be.

#RealEstate #ChicagoRealEstate #Pandemic #HomePrices
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.

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