Zillow: Economists Temper Housing Recovery Expectations

by 21 Mar 2012

Sharp Downturn in Q4 Case-Shiller Indices Sparks Economists to Revise Expectations Downward in March 2012 Zillow Home Price Expectations Survey

Falling Home PricesSEATTLE, March 21, 2012 /PRNewswire/ -- Economists expect home prices to fall 0.7 percent in 2012, which is more negative than their previous expectation of a 0.2 percent decline, according to the March 2012 Zillow® Home Price Expectations Survey, compiled from 104 responses by a diverse group of economists, real estate experts and investment and market strategists.

The survey, sponsored by leading real estate information marketplace Zillow, Inc. (NASDAQ: Z) and conducted by Pulsenomics LLC, is based on the projected path of the S&P/Case-Shiller U.S. National Home Price Index during the coming five years.

The March survey shows that economists expect U.S. home prices to begin to rise in 2013, although expectations for how much they would rise were tempered when compared to their responses in the December survey. For example, economists now predict home prices will rise 1.4 percent in 2013, compared to their previous prediction of 1.8 percent.


Home Price   Prediction

Dec. 2011

Home Price   Prediction

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"The fourth quarter drop in the national Case-Shiller Index was sharper than some expected and is the likely reason so many of the economists in the survey revised their forecasts downward," said Zillow Chief Economist Stan Humphries. "Looking at the longer history of these forecasts by top economists, the bottom in home prices always seems just around the corner but never quite here. Conditions across the country vary considerably. Some markets have already hit bottom and are experiencing tight inventory and multiple offers, while foreclosures and negative equity continue to pull down the housing market in many other parts of the country."

The economists surveyed varied widely in their expectations for 2012. The most optimistic[i] quartile of panelists predict a 1 percent increase, on average, in home prices during the full year, while the most pessimistic[ii] predict an average decline of 2.8 percent. Of the individual economists, the most bullish, Susan Sterne of Economic Analysis Associates Inc., predicts home prices will climb 5 percent during the year while Gary Shilling of A. Gary Shilling & Company, Inc. expects prices to fall 8 percent.

The March survey also queried the panelists about their views regarding recent housing policy statements by the Federal Reserve as well as the potential market impact of a large-scale, bulk sales program of foreclosed properties by the federal government. 

"The majority of experts believe that implementation of a bulk sales program is a good idea, even though more than half indicated that it is at least somewhat likely that bulk sales will materially depress overall price levels in housing markets. However, 79 percent believe that a government bulk sales program will result in a shorter waiting period before the onset of a broad and sustained housing market recovery," said Terry Loebs, founder of Pulsenomics.

Additional details regarding this portion of the survey are available at www.pulsenomics.com.

This is the 13th edition of the Home Price Expectations Survey, and it was conducted from March 1-14, 2012, by Pulsenomics LLC on behalf of Zillow, Inc.

For full survey results and graphics, please visit Zillow Real Estate Research at www.zillow.com/blog/research, or www.pulsenomics.com.


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