On December 9, 2015, the Zillow Q4 2015 Home Price Expectations Survey (pdf) results were released. This survey is done on a quarterly basis.
Excerpts from the Press Release:
The survey responses revealed that some housing experts are concerned about over-valuation in some of the nation’s hottest housing markets – and that there is significant disagreement among experts about whether the rapid home-value growth in those markets puts consumers at risk.
Some experts said they think bubble conditions are already present in Miami, Los Angeles, Houston, San Diego, and Seattle. A quarter of respondents said they think there is significant risk of a housing bubble in the next three years in Boston. (The same number of panelists said there is no risk of a bubble in Boston in the next five years).
The bubble fears are coming to the surface even as home values overall are expected to gradually level off over the next several years. The ZHPE panel projects an annual growth rate of 3.9 percent through the end of 2015 – a gradual slowing of the U.S. housing market. Over the next five years, among all 108 panel respondents, the expected average annual home-value appreciation rate is now just over three percent. This scenario would result in a national median home value of more than $215,000 by the end of 2020.
Various Q4 2015 Zillow Home Price Expectations Survey charts are available, including that seen below:
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 Q4 2015 Home Price Expectations Survey (pdf) is interesting. Of the 100+ survey respondents, only one (of the displayed responses) forecasts a cumulative price decrease through 2020. That forecast is from Mark Hanson, which foresees a 15.97% cumulative price decrease through 2020.
The Median Cumulative Home Price Appreciation for years 2015-2020 is seen as 3.78%, 7.28%, 10.63%, 13.78%, 17.19%, and 20.62%, respectively.
For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Mark Hanson’s above-referenced forecast) will prove 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
SPX at 2052.23 as this post is written