Each quarter Zillow and Pulsenomics conduct a survey of a little over 100 real estate experts to find out what their outlook is for US home prices and other real estate trends. Well, yesterday they published the results of their 2nd quarter 2020 Home Price Expectations Survey and the results were very different from all the previous surveys I've seen before. Usually they predict steadily increasing home prices but this time they actually predicted a 0.3% decline for 2020, followed by a measly 0.9% increase in 2021. Their cumulative forecast for the next 5 years is 10.8% (which translates to 2.1% per year), compared to 15.9% last quarter. I'm pretty sure it's because of the economic damage sustained during our social isolation of the last few months.
Terry Loebs, founder of Pulsenomics commented on this unprecedented negative outlook:
This is the first time since 2012 that the panel-wide price outlook has turned negative, and the quarter-to-quarter swing in expectations is the largest we’ve seen in more than a decade. Longer term, the outlook for home values nationwide is mixed — price projections for 2022 and beyond actually inched higher from levels recorded prior to the Covid-19 outbreak. However, nearly seven in ten experts now indicate that their five-year forecast has downside risk. Last quarter, fewer than four in ten panelists foresaw downside — of course, that was before the Covid-19 crisis, its economic devastation and unprecedented government response.
One other thing. Most of the panelists believe that the recovery from the lost transaction volume these last few months will be spread out over several years.
These surveys always contain additional questions for the respondents to get their opinions on other topics. The most interesting question this quarter was what impact the pandemic was going to have on different types of demand. Their answers were self-scored betweeen -10 (non-existent) to +10 (overwhelming). Basically the respondents believe that there will be an urban exodus. Most thought urban demand would decline (average score -2.9) while suburban (+3.3) and rural (+2.1) demand would increase.
Chicago Area Home Price Outlook
Once again I turn to the Case Shiller home price futures market for some insight as to where Chicago area home prices are heading. John Dolan from Home Price Futures provided the graph below along with some explanation. Compare these values to the values found in my April post. The bids have gone from a more than 20% drop to around a 4% drop in this latest chart so it's a pretty remarkable recovery in just a couple of months. The implied cumulative appreciation over the next nearly 5 year period works out to about a paltry 3.4%.
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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.