A couple of weeks ago Zillow and Pulsenomics released the results of their Second Quarter 2019 Home Price Expectations Survey of a panel of just over 100 real estate experts. The graph below summarizes their current outlook for home prices out to 2023 - look at the orange line. It dropped slightly from the first quarter survey, with a cumulative appreciation over the 5 year period of 16.8%, down from 17.1% last quarter. Of that 0.3% drop 0.2% came out of 2019.
Pulsenomics Founder Terry Loebs seems to think that the panel feels like other factors will overwhelm the benefit of lower mortgage rates. According to the press release:
Although 30-year mortgages are near 18-month lows and available now at rates below 4%, the near-term outlook for home prices has actually weakened a bit from the previous survey in February. Loebs explained, "Together, these data suggest that most experts believe the recent rate move is a temporary dip, and that home-buying demand through next year will be dampened by other, more persistent factors that affect affordability, such as constrained inventory and the growth of house prices relative to wages."
In fact, 44% of the respondents felt that there was downside risk to the forecast while only 19% saw upside. And Loebs is not merely speculating about what is behind the tempered outlook for home prices. The survey actually asked the respondents what factors could lower demand. Another factor mentioned is the aging population.
The survey also asked respondents about their expectations regarding the next recession. Now, keep in mind that this survey was released two weeks ago and obviously conducted before then. But at that time 50% of the respondents were already saying that the recession would start in 2020 - i.e. the most common choice for the onset of the recession. And they were saying that "The most likely triggers for the next recession are trade policy, a stock market correction or geopolitical crisis." Hmmm.
And, according to the experts, the housing market is not likely to be the cause of the recession but it will certainly be impacted by it.
Chicago Area Home Price Outlook
Once again, in order to get some insight into the outlook for Chicago area home prices I look to the Case Shiller home price index futures market for Chicago. I get this information from John Dolan who is the market maker for these futures contracts and also one of the panel members mentioned above. He provided the graph below that shows the bids and asks out to November 2022 and they look pretty darn flat - as if the market doesn't have a lot of confidence in the area. You think?
He also gave me the underlying data so that I could calculate the implied appreciation. It's actually a bit more optimistic than the last time I checked in, coming out to cumulative appreciation of 5.3% over the 4 year period. That's equivalent to 1.3% per year. Nothing to write home about but better than a sharp stick in the eye.
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Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider's view of the seamy underbelly of the real estate industry 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.