Home Price Forecast: Experts Reign In Expectations

Last week Zillow, in conjunction with Pulsenomics, released the results of their 4th quarter National Home Price Expectations Survey of 111 real estate experts. After a more optimistic outlook last quarter the experts reigned it in this quarter and also extended their outlook into 2021. The details of their forecast are captured in the graph below which you can click on for a larger version.
They actually raised their outlook for 2016 to 4.75% from 4.5% last quarter but took it down a bit in each subsequent year. It looks like the biggest cuts came in 2019 and 2020 – 0.4% and 0.3% respectively. The net result is that they now forecast cumulative home appreciation of 17.9% through 2020 vs. 18.7% when they were asked last quarter. In addition, their 2021 home price forecast tacked on an additional 3.0%. All in all the entire outlook amounts to 3.3% compound annual appreciation compared to the fact that national home prices were up 5.5% in the last 12 months according to Case Shiller.
Home price forecastPulsenomics founder, Terry Loebs, commented on the fact that the outlook is much dimmer in the outer years of the home price forecast and the fact that there is quite a bit of divergence among the survey respondents.

More than 90 percent of the 111 panelists who participated in this quarter’s survey expect home value growth to be slower next year, and more than 85 percent of them foresee home value appreciation rates flat or lower compared to 2016 in every year through 2021. While those figures represent a clear consensus that home value growth will moderate in the coming years, there is no consensus concerning the pace of the expected deceleration.  For example, the most optimistic experts project that U.S. home value appreciation will average more than 4 percent annually through 2021, while the most pessimistic expect an average annual rate of just 1.1 percent for 2017 and beyond.

Outlook For Chicago Area Home Prices

Once again I turn to the futures market for the Chicago Case Shiller Home Price Index in order to get an idea of what the market’s outlook for Chicago area home prices is. I get this information from John Dolan’s HomePriceFutures.com Web site.
The furthest out month for which we have pricing is November 2018 with an index value of 143.1 which corresponds to the index for September – exactly 2 years from the last index value released by the Case Shiller people. This is indeed lower than the 144.9 price when I checked it last quarter and it now corresponds to a paltry 1.9% annual appreciation rate. That is indeed a pretty low annual appreciation rate when you consider that the last release was up 4.3% year over year.
Chicago home price forecast
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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.

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