On August 28, 2018, the Zillow Q3 2018 Home Price Expectations Survey results were released. This survey is done on a quarterly basis.
An excerpt from the press release:
Annual home-value appreciation has been faster in 2018 than it was in 2017, and inventory has fallen on a year-over-year basis for 42 consecutive months. These conditions have put sellers in the driver’s seat for the past few years.
Recently, though, data suggest the balance may be starting to tilt back toward buyers. Home-value growth is slowing in more than half of the nation’s 35 largest metros, and price cuts are becoming more common. But even in those markets where appreciation has slowed, it remains above its historic average rate and sellers continue to have the upper hand, particularly at the most affordable price points. Three out of four economists surveyedii said the national housing market would not shift to a buyers market until 2020 or later.
Various Q3 2018 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 Q3 2018 Home Price Expectations Survey (pdf) is interesting. Of the 115 survey respondents, only three (of the displayed responses) forecasts a cumulative price decrease through 2022, and none of those forecasts is for a double-digit percentage decline. The largest decline is seen as a 3.4% cumulative price decrease through 2022.
The Median Cumulative Home Price Appreciation for years 2018-2022 is seen as 6.00%, 10.45%, 13.82%, 16.64%, and 19.80%, respectively.
For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in the above-referenced forecast) will prove far 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 2897.87 as this post is written