A recent quarterly survey of more than 100 housing experts and economists revealed that house prices are expected to appreciate by 4.4% to the end of this year. The more optimistic analysts surveyed predicted house prices would increase by 5.8% annually, while the most pessimistic predicted an average increase of just 3.2%.
Looking beyond this year, home value appreciation is expected to slow to 3.8% by the end of next year, and to 3.4% by the end of 2016. These rates are reasonable, as before the housing price bubble home values grew at 3.6% per year between 1987 and 1999. Most analysts expect median home values to exceed prerecession peaks by the first quarter of 2018, but the more optimistic among them predicted home values would increase by around 12.6% beyond peaks seen in 2007 by the end of 2018. Even the most pessimistic predicted home values would be just 5.9% below 2007 peaks by the end of 2018.
These second quarterly findings are slightly less optimistic than results for the first quarter survey as most expected a 4.5% price increase this year. The article in RISMedia points out this latest survey shows the gap between the most optimistic and most pessimistic expanding, whereas before it had narrowed over the past year. These results are consistent with the uncertainty over just when conditions in the property market in the US will begin to normalize. It's too soon to tell if plans to expand mortgage credit will have a lasting effect on home values, and if this will increase confidence in the housing market and market expectations.
The survey also asked experts to identify the main cause of declining affordability, choosing from five options. The option that gained the most support was stagnant income growth, with 28% agreeing this was the primary cause. Close behind were abnormally high rates of home price and rent appreciation, at 27%, closely followed by the low number of homes currently available for sale or rent at 21%. The remaining two options were tight credit conditions which 11% agreed were a primary cause, and an insufficient number of homes which got the agreement of 13% of panelists.
Experts point out that even though the housing market is still far from normal, things are considerably better than they were a couple of years ago. Problems include lack of inventory which is partially due to high rates of negative equity, combined with low rates of new home construction. Things are further hampered by tight credit conditions and buyers inability to save for a sufficiently large down payment.