Economist bullish on US property market, predict price rise of 2.3% for 2012

US Economists expect home prices to rise by a total 2.3% during 2012, and overall have become more bullish on home prices than they were in the second quarter, according to a survey.

The September 2012 Zillow Home Price Expectations Survey, compiled responses from a diverse group of economists, real estate experts and investment and market strategists and based on the projected path of the S&P/Case-Shiller US National Home Price Index during the coming five years is upbeat. Survey respondents expect home prices to increase much more than June’s a fall of 0.4% and they have also revised their forecasts for 2013 to 2016, predicting steadily increasing home values in each year. ‘This is further evidence that we’re seeing a true recovery in the housing market. Not since the middle of 2010 in the midst of the home buyer tax credits have we seen this group so bullish on housing,’ said Zillow chief economist Stan Humphries. ‘It’s refreshing to see this optimism at a time when the market seems to be making an organic recovery, in the absence of an artificial stimulant like the tax credits,’ he added. The most optimistic quartile of panelists predicts a 4.4% increase in 2012, on average, while the most pessimistic predict an average increase of 0.3%. The survey also found that respondents overwhelmingly favour changes to the mortgage interest deduction. Some 10% believe it should be eliminated as soon as possible, 50% believe it should be eliminated, but phased out gradually, and 30% believe it should remain, but that more restrictions should be placed on eligibility. Only 11% believe it should remain as it is. ‘Although the mortgage interest deduction remains enormously popular with existing and aspiring homeowners, it costs the federal government about $90 billion a year,’ said Pulsenomics founder Terry Loebs. ‘Time will tell whether the unprecedented fiscal challenges facing the US coupled with a housing market now on the mend will embolden more policymakers to touch this lightning rod,’ he added.