When Zillow and Pulsenomics released their 2nd Quarter 2021 Home Price Expectations Survey for the nation their respondents were predicting 26.7% cumulative price appreciation by the end of 2025. That was already a substantial increase from several earlier projections. But when they released their 3rd Quarter survey a couple of weeks ago we saw that their respondents took another great leap and raised their home price forecast to 31.8%. That’s another record high.
Check out the graph below and you’ll see that most of that growth is expected to occur in 2021 – 11.7% vs. 8.7% in the 2nd quarter survey. The projected growth over the remaining 4 years averages out to 4.2% per year, compounded.
Terry Loebs, founder of Pulsenomics, explained why home price appreciation is expected to slow down after this year:
Across the U.S., home value appreciation rates and annual rent price increases are at historically high levels, and home price expectations are now the highest we’ve recorded in the 12-year history of this survey. The silver lining for aspiring homeowners is that the worst of the housing supply crunch looks to finally be behind us, and most experts believe that the past year’s rapid price boil has begun to simmer down.
Chicago Area Home Price Outlook
Once again John Dolan, the market maker for the Case Shiller home price futures, provided the latest Chicago area home price futures contract prices, where available, so that I could try to get a handle on the outlook for Chicago area home prices. Notice that his prices don’t go out past 2023, and that’s because the market is so crazy right now he doesn’t have good visibility on prices in that timeframe.
Note that the contract months shown are for February, which corresponds to data for the 3 months ending in December of the prior year. So this only looks out through the end of 2022. From the end of 2020 to the end of 2022 the futures contract outlook is for 17.1% cumulative appreciation, compared to the real estate experts’ 18.2% national forecast for the same time period.
Given how much the Chicago area has been lagging the rest of the nation I was surprised to find these two numbers that close. Upon further inspection I realized that the expert national forecast for 2021 is still too convervative, given that the most recent Case Shiller release shows national home prices already rising 19.7% over the last 12 months. Note that the survey was conducted before the most recent release so these experts are going to need to jack up their forecast once again in the fourth quarter.
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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.