Demand and Inventory Drought Drive Up Price Forecasts

Housing economists and experts are raising their price forecasts for the balance of the year as relentlessly low inventories and strong demand continue to drive prices up prices and crippled affordability, especially for entry-level buyers in more active markets.

The 2017 Q2 Zillow Home Price Expectations Survey found that the more than 100 participants in its latest survey expect prices to end the year 4.8 percent higher than last year, a significant increase over the 3.4 percent increase forecasted by the experts a year ago.

They expect appreciation expected to slow to 3.65 percent in 2018 and to 2.7 percent by 2021. Panelists expected cumulative home value growth from 2017 through 2021 to total almost 17.9 percent, on average.

The most optimistic quartile of panelists said they expected home values to grow more than 5.8 percent through 2017 and by a cumulative 27.4 percent through 2021, on average. The most pessimistic said they expected growth just shy of 3.8 percent this year and scant cumulative growth of less than 6.4 percent through 2021.


Over the past year-plus, a persistent dynamic has helped drive home values higher nationwide and in many large markets: Inventory of homes for sale has been falling consistently, as demand from home buyers has steadily grown. It was reasonably expected that this dynamic would ease as builders brought more supply on line, more home sellers came out of the woodwork and/or rising mortgage interest rates and other market factors dampened home buying demand. But as yet, this shift hasn’t happened, nor does it seem likely to anytime soon, resulting in a new normal for the time being in the housing market.

“On the heels of last year’s nearly seven percent national home value appreciation rate, the prospect that prices will increase less than five percent overall this year might be dispiriting to some,” said Pulsenomics Founder Terry Loebs. “Yet, 4.8 percent is not only well above the historical average annual gain, it’s the most optimistic projection for 2017 that we’ve seen from our expert panel over the past five years. Although most pessimistic experts still expect a sharp slowdown to commence in 2018, even this group anticipates home values to increase an average of nearly four percent this year. Given these projections, it’s a pretty safe bet that U.S. home equity growth will exceed $1 trillion for the sixth consecutive year, and continue to buttress consumer confidence and household spending in 2017, especially if more of today’s renters can afford the transition to homeownership.”

The Zillow® Home Price Expectations Survey surveyed 106 experts between April 24 and May 8, 2017. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. and asked the experts about their expectations for the housing market.

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