US property prices set to rise by an average of 4.6% in 2013, poll suggests
Residential real estate prices in the United States are set to end 2013 up an average of 4.6% and rise cumulatively by 22%, on average, over the next five years, according to a new survey.
The first quarter Zillow Home Price Expectations Survey also shows that the majority support policies that would allow certain underwater home owners to refinance at today's low rates.
The survey of 118 economists, real estate experts and investment and market strategists also predicts that home values will rise another 4.2% on average in 2014, before moderating somewhat to annual appreciation rates between 3.6% and 3.8% in 2015, 2016 and 2017.
On average, panellists predicted home values to rise 4.1% annually from 2013 through 2017, exceeding the pre-housing bubble of 1987 to 1999’s average annual appreciation rate of 3.6%.
This is the first time the predicted average annual growth rate for the next five years has surpassed pre-bubble levels since the survey's inception three years ago.
‘The panel is quite bullish on home prices near term, considering a pre-bubble average appreciation rate of 3.6 percent per year,’ said Zillow chief economist Stan Humphries.
‘That said, their expectations are a bit shy of the home value gains of 5.5% that we saw in 2012, implying some moderation in the pace of gains,’ he explained.
‘The panel expectations are consistent with continued strong home value growth this year fuelled by tighter than normal inventory of for sale homes and robust demand attributable to high affordability and a stronger general economy,’ he added.
The most optimistic quartile of panellists predicted a 6.1% increase in home values in 2013, on average, while the most pessimistic predicted an average increase of 3%. Through 2017, panellists predicted cumulative home value changes of 22%, on average.
Expectations for cumulative home value change projections ranged from 34.2% among the most optimistic quartile to 11.7% among the most pessimistic, on average.
The survey also asked the panel to indicate their view of a reasonable time frame for winding down government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and to weigh in on the debate over the merits of providing new refinancing options to underwater homeowners who are current on their mortgage payments.
The majority of panellists, 59%, indicated that a reasonable and appropriate timeframe for winding down the GSEs is within the next five years. On the opposite ends of the spectrum, 13% suggested a timeframe within the next two years, and 10% said they believe a period of more than 10 years is sensible.
Existing proposals that would facilitate refinancing of certain underwater borrowers include the Responsible Homeowner Refinancing Act of 2012 and the Rebuilding Equity Act. The majority of respondents said they supported these types of policy initiatives.
‘More than four of every five supporters of these refinancing proposals said they believe that borrowers who have demonstrated an ability to make their payments in recent years would pose little or no incremental risk to taxpayers if they refinanced. Two thirds of supporters said they believe that the lower monthly payments would create a significant stimulus for the economy,’ said Terry Loebs, founder of Pulsenomics LLC that conducted the survey.
‘But the 41% of panel respondents who do not support these plans also hold strong views. More than two thirds of them said they believe that rewriting loan contracts is bad policy in general, and that lowered monthly payments for borrowers ultimately translate into taxpayer and investor losses,’ he added.