Last week Zillow and Pulsenomics released the results of their 2nd Quarter 2016 Home Price Expectations Survey of more than 100 housing experts. Their 2016 home price forecast for the nation as a whole improved from last quarter. As you can see in their graph below they are now expecting 4% price appreciation this year vs. 3.7% last quarter. However, their outlook through 2020 actually declined a bit with them expecting a total of only 17.5% appreciation in that time period, down from 17.7% appreciation last quarter. That means that over the next 4 years they are expecting only about a 3.1% annual appreciation on average.
Pulsenomics founder Terry Loebs put their home price forecast in inflation adjusted terms:
"Longer-term expectations for U.S. home values continue to trend slowly downward, and are at the lowest levels they've been since the market recovery began four years ago. After adjusting for expected inflation, the expert panel's forecast for national home value appreciation averages 1.7 percent annually through 2020." Although this would mark a significant pull-back from the 3.6 percent inflation-adjusted average annual rate experienced since the start of the recovery in 2012, Loebs said that housing market stakeholders should keep the fading optimism in perspective. "During most of the decade that preceded the onset of the real estate bubble more than fifteen years ago–a relatively normal period for the U.S. housing market–nominal home values didn't even keep up with inflation."
Outlook For Chicago Area Home Prices
In order to get a sense for the Chicago area home price forecast I look to the Case Shiller home price index futures market where people can enter into contracts to buy or sell the index at an agreed upon future level. Since this reflects where people are willing to put their money it serves as a proxy for a local forecast. If you think you know something that others don't you are free to place a bet against them and in the process you will move the market to more closely reflect your views.
The graph below comes from John Dolan's April 2016 Case Shiller Futures Review. The market has the November 2018 contract (actually the index value for September) at around 143, which is higher than it has been the last two quarters that I checked in on it. That works out to only 2.6% annualized appreciation, which is lower than the country as a whole.
In addition to showing the current values the graph below also reflects where those values were back in December 2014. As you can see the outlook has come down a bit.
Impact Of The Election On The Housing Market
Pulsenomics also asked the survey respondents what impact they thought the presidential candidates would have on the housing market if they were elected. They felt that Clinton would have a positive impact on home values and housing finance reform and a neutral impact on the overall economy. On the other hand they felt that Trump would have a negative impact across the board because of his "unpredictability". They also opined on the other candidates but let's face it...none of them are really contenders at this point.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.