Last week the Zillow/ Pulsenomics 3rd Quarter Home Price Expectations Survey of over 100 real estate experts came out with their revised forecast of national home price appreciation to 2022. These people have been raising their outlook for several quarters in a row now, this time projecting 20.0% cumulative appreciation vs. 19.1% last time. 20% over 5 years translates to a 3.7% average annual compounded appreciation. You can see their outlook graphed below (clicking on it will give you a larger version).
The press release suggests that tight inventory, exacerbated by lack of new home construction, has contributed to a market that favors home sellers and home price appreciation in excess of historic rates. However, the panelists believe that the market will begin to favor buyers by 2020, possibly later, with the Midwest flipping by 2019. The only thing is that it's not entirely clear what the experts believe is going to precipitate this change, other than the fact that they believe they are starting to see signs of a changing market - e.g. slower home price appreciation.
Chicago Area Home Price Outlook
Once again John Dolan has graciously provided me with prices for the Chicago Case Shiller home price futures contracts, which I use as a market based proxy of the outlook for Chicago home prices. See the graph below, which now "predicts" an average annual appreciation rate of only 2.0% per year from Sept 2017 - Sept 2022. That is down from 2.2% when I checked last quarter and almost half what the national outlook is.
It finally dawned on me that I can check the futures prices for the 10 metro area average to see how it compares to the Zillow/ Pulsenomics expert panel forecast. Interestingly, it works out to an annual average of only 2.7% price appreciation, which is indeed lower than predicted by the panel. So part of what explains the lower Chicago forecast appreciation is the fact that the futures market is less optimistic than the real estate experts.
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.