Pulsenomics & Zillow: Expert Home Price Forecast Gets Even Better

Pulsenomics & Zillow: Expert Home Price Forecast Gets Even Better
Real estate experts are increasingly optimistic
about their home price forecasts

As the Case Shiller index proved last week home prices across the nation, along with the Chicago metro area, have been taking off recently, with appreciation rates hitting multi-year highs. So, when Zillow and Pulsenomics recently did their 4th quarter survey of real estate experts it was no surprise that their national home price forecast moved up significantly from the 3rd quarter survey.

First, please note that the 4th quarter survey extends the outlook by one year - into 2025, which you can see in the graph below. The cumulative home price appreciation forecast through 2024 was raised from 16.3% last quarter to 22.1% now. A good chunk of that came from the forced realization that 2020 was already realizing higher appreciation than last forecast. Now the 2020 forecast is for 6.3% appreciation vs. 3.7% last quarter. In addition, 2021 home prices are now projected to grow by 4.2% whereas last quarter the experts were projecting 2.6%. Get the picture?

Expert home price forecast

The forecast for US home prices has improved again as actual appreciation hits multi-year highs

Chicago Area Home Price Outlook

The outlook for Chicago area home prices has similarly improved since the last time I checked. However, for this perspective I have to go to John Dolan of Home Price Futures since the home price expectations survey doesn't go down to the metro area. John is the market maker for the Case Shiller home price index futures and he provided the graph below. It looks much better than it did last time. What that graph tells us is that the futures market is anticipating 11.8% appreciation through the end of 2024. That is obviously a far cry from the 22.1% appreciation forecast for the nation by the real estate experts. But that shouldn't be too big of a surprise since Chicago has been lagging the nation for years now.

Chicago Case Shiller futures prices

The outlook for Chicago home prices is much less optimistic than what the experts see for the nation

While Home Prices Surge, Rents Plummet

There are some other interesting nuggets in the supplemental questions section of the quarterly survey. For instance (and this was not a question but rather background information) the graph below shows how rents have diverged from home prices since the pandemic struck. It's dramatic and it can't possibly be sustainable simply because low rents will force down the price of investment properties which necessarily leads to lower home prices.

Rents vs. home prices

Rents and home prices have recently diverged to the point that the gap cannot be sustainable

Mortgage Forbearance Outcomes

Survey respondents were also asked what they thought would happen to the 2.7 MM homeowners whose mortgages are currently in forbearance (most likely as a result of pandemic induced economic hardship). Fortunately, they only see 18% of those ending in foreclosure and even those might be delayed by up to one year from now.

Projected outcomes for mortgages in forbearance

Survey respondents were fairly optimistic that most mortgages in forbearance would not end up as foreclosures

#RealEstate #ChicagoRealEstate #Coronavirus #HomePrices #Foreclosures #Renting

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.

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