On December 4, 2018, the Zillow Q4 2018 Home Price Expectations Survey results were released. This survey is done on a quarterly basis.
Two excerpts from the press release:
The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 real estate economists and investment experts for their predictions about the U.S. housing market, including which three markets they believe are most likely to outperform the U.S., and which three are most likely to underperform in 2019.
The average expected home price appreciation rate for next year is 3.8 percent, down from 4.2 percent in the previous quarter. Also, the panel’s expected annual growth rate over the next five years ticked down to 3.4 percent.
Various Q4 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 Q4 2018 Home Price Expectations Survey (pdf) is interesting. Of the 100+ survey respondents, only four (of the displayed responses) forecasts a cumulative price decrease through 2023, and none of those forecasts is for a double-digit percentage decline. The largest decline is seen as a 6.51% cumulative price decrease through 2023.
The Median Cumulative Home Price Appreciation for years 2018-2023 is seen as 5.80%, 10.05%, 13.15%, 16.27%, and 19.70%, and 23.20%, 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 2700.06 as this post is written