House prices to see out the year strongly

by MPA09 Aug 2013

More than 100 experts said they expected home values to rise nearly 7% year-over-year by the end of 2013.

More than 100 economists, real estate experts and investment and market strategists were queried for the latest Zillow Home Price Expectations Survey. They predicted that the Zillow Home Value Index would end 2013 up an average of 6.7%, rising to a median U.S. home value of $167,490 by the end of the year. That’s up from last year’s median home value of  $156,900 and the current median value of $161,000. The survey also suggested that home prices could approach 2007’s peak of $194,000 by the end of 2017.

Respondents did expect a slowdown in appreciation in 2014, however.

"Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand and low inventory. Combined, these factors will continue putting upward pressure on home values for the next few months," said Zillow Senior Economist Dr. Svenja Gudell. "But the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise and more inventory becomes available.”

The survey predicted that appreciation rates would slow to about 4.4% in 2014, with further slowdowns to 3.6%, 3.5% and 3.4% in 2015, 2016 and 2017, respectively. That works out to an aggregate rise in home values of 23.7 percent by the end of 2017.
On the whole, survey respondents were unconcerned with recent mortgage rate hikes; the majority said rates would have to rise at least 6% to pose a significant threat to value growth.

"Six percent is the minimum mortgage rate threshold that the most number of panelists view as a potential show-stopper for the recovery," said Pulsenomics founder Terry Loebs. "However, nobody should dismiss the implications for the housing market of the less popular view -- held by 38 percent of our experts -- that we are already flirting with a reversal of fortunes at or within about 100 basis points of prevailing mortgage rate levels."

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