Last week Zillow/ Pulsenomics released their 1st Quarter 2016 Home Price Expectations Survey of more than 100 housing experts and the results paint a slightly more optimistic outlook for this year and the next 5. They raised their home price forecast for the nation for 2016 to 3.7% appreciation vs. only 3.4% appreciation last quarter. Over the next 5 years they are calling for total appreciation of 17.7%, which compares to their forecast of about 17.0% last quarter.
Nevertheless, Pulsenomics founder Terry Loebs made the survey results sound more downbeat than they really were:
The outlook for 2016 home price appreciation is 3.7 percent, less than the 4 percent value increase realized in 2015. The five-year average annual rate of home value appreciation expected by the panelists is stuck at 3.3 percent, its lowest level since 2012. These subdued expectations are remarkable in light of the improvement in headline unemployment numbers, recent evidence of real income growth, stubbornly low home inventory levels, and very low mortgage rates that seem unlikely to spike anytime soon.
While his numbers and statements are correct the time horizon did shift from the 4th quarter to this release and when you compare the results over identical time periods the respondents actually raised their home price forecast for the next 5 years.
The press release actually started off with this strange tangential focus on the impact of undocumented immigration on construction labor costs. My guess is that with all the inflammatory rhetoric on this topic lately they wanted to get in on the action. I found some of their other survey topics to be more interesting and will get into some of those later.
Outlook For Chicago Area Home Prices
Since the Zillow/ Pulsenomics home price forecast focuses on the entire nation I periodically analyze what is going on in the Case Shiller home price index futures market for the Chicago area. I got the graph below from John Dolan’s January 29 Case Shiller futures review and it shows not only the current futures prices but also what those prices were in December 2014. As you can see the outlook has come down considerably.
The furthest out point is now November 2018 and the forecast has dropped once again since I last checked in 3 months ago. For instance, last time the November 2017 index value was 141.2. Now it is only 138.5. Looking out to November 2018 the futures market is expecting not even a 2.8% annual appreciation from September (that is the month that gets released in November) 2015. Hmmm. Why aren’t people bullish on Chicago?
Thoughts On Federal Housing Policy
One of the more interesting questions they asked their panelists in the survey is what they thought the role of the government should be in the housing market and mortgage finance system. A clear majority felt the government should be less involved than it is now.
However, when asked to rank a variety of potential housing goals for the federal government the panelists felt that “ensuring a stable and solvent housing finance system” was the most important. And when asked what the most important housing issue was for the presidential candidates to address the “housing finance system and the status of the GSEs” (Fannie Mae and Freddie Mac) was ranked the highest by 44% of the respondents.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut 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.