A couple of weeks ago Zillow and Pulsenomics released their 2nd quarter Home Price Expectations Survey for the nation and their panel of more than 100 real estate experts have gotten more optimistic since they released their last survey. I don't think they really had much choice given that the year over year home price gains have been clocking in around 5.8% which they attribute to the lack of inventory of homes for sale. So their home price forecast for this year is now a 4.8% increase vs. a 4.4% increase last quarter. Over the 5 year time horizon they raised their cumulative forecast from 17.3% to 17.9%.
Their entire 5 year horizon is shown in the graph below and their outlook annualizes to an average of a little more than 3.3% compounded annually.
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. 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.
In this survey they also asked the panelists about the impact of foreign investors on the housing market. Basically they said that the impact was fairly insignificant except at the high end of the market. They also didn't see any increase in foreign investment activity in the next year.
Outlook For Chicago Area Home Prices
The best forecast we can get for Chicago area home prices comes from the Case Shiller home price index futures contracts for Chicago. I obtained the graph below from John Dolan's HomePriceFutures.com Web site but now it really only goes out to November 2018 which corresponds to the data for September 2018. The points beyond that really don't represent the market because there are no corresponding asks but at least they represent minimum values.
Based upon the contract prices for November 2018 it looks like the futures market is expecting home prices to rise by 5.0% per year for this year and next.
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.