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Economists and real estate experts gloomy over US property outlook

Five years after the peak of the market prices are still not rising overall, with a projected increase of just 1.1% for 2011, the research report from MacroMarkets shows.

It is the result of surveying the views of real estate experts, investment and market strategists and economists on their home price expectations.

It says that although some local real estate markets are stable or strong, more broadly, fundamentals in the US housing market remain very weak despite record low interest rates. The dimming outlook for national home prices has also been impacted by other factors that are shaking economic confidence globally.

‘Markets and government institutions are visibly struggling to respond consistently to an unprecedented rash of crises and conflicts. These struggles diminish confidence, which compounds the underlying economic stresses and lowers expectations,’ said Robert Shiller, MacroMarkets cofounder and Yale University professor of economics.

The MacroMarkets home price expectations survey now says that home prices will grow at a mere 1.1% nominal average annual rate through to 2015.

‘Expectations for home price performance in 2011 has become somewhat less negative. Unfortunately, the average projection is somewhat more negative for each of the following four years,’ added Shiller.

Terry Loebs, founder of Pulsenomics, the firm that conducts the survey for MacroMarkets, noted that the data still reveal a wide variety of individual views among panelists regarding a recovery in the US housing market.

'The erosion of price expectations in the face of record low mortgage rates and the wide dispersion of views among many professional forecasters are symptoms of persistent dysfunction and imbalances in this country’s housing market,' said Loebs.

In the September survey, the panelists also offered their views of the likelihood, desirability and necessity for further government intervention in the US housing and mortgage finance markets in the coming 12 months.

Almost three quarters, 73%, of the respondents who shared a view think that further policy action is highly likely or likely, while more than half, 57%, said such action is undesirable, and almost half, 49%, said additional government action is unnecessary.

‘This data suggests that regardless of when and how housing recovers, controversy will persist regarding the role of government in the market,’ explained Loebs.

More than half of panel members who indicated that more policy action is desirable or necessary suggested specific measures the government might focus on.

‘We received a variety of constructive proposals. Several panelists clearly want or expect the government to be a catalyst for more effective mortgage refinancing and modification  initiatives, as well as rental and other home equity conversion programmes,’ added Loebs.