Based on predictions from 118 economists, real estate experts, and investment and market strategists, these respondents believe home prices will end 2013 up on average 4.2% and rise cumulatively by 22% over the next five years.
Similar to this year, survey respondents anticipate home values will escalate another 4.2% in 2014 before moderating somewhat to annual appreciation rates between 3.6% and 3.8% over the next three years. With an annual 4.1% prediction in housing unit prices expected between 2013 and 2017, this represents the first time the average annual growth rate has surpassed pre-housing bubble (1987-1999) since the Seattle-based analytic firm began its survey three years ago.
The most optimistic quartile of panelists predicted a 6.1% increase in home values this year, while pessimistic economists projected for an average jump of 3%. Furthermore, through 2017, the outlook for cumulative home price change projections ranged from 34.2% among the most positive quartile respondents to 11.7% for the most discouraged housing forecasters.
“The panel is quite bullish on home prices near-term, considering a pre-bubble average appreciation rate of 3.6% per year,” said Stan Humphries, chief economist at Zillow. “That said, their expectations are a bit shy of the home value gains of 5.5% that we saw in 2012, implying some moderation in the pace of gains. The panel expectations are consistent with continued strong home value growth this year fueled by tighter-than-normal inventory of for sale homes and robust demand attributable to high affordability and a stronger general economy.”
Also in the survey, panelists were asked what a reasonable timeframe is to “wind-down” Fannie Mae and Freddie Mac, as well as voice their opinions over new refinancing options for underwater borrowers who are current on their mortgage payments.
The majority of respondents (59%) indicated that an appropriate amount of time to eliminate the government-sponsored enterprises is within the next five years. Conversely, 13% of panelists suggested a timeframe of two years, while 10% said the GSEs should be existent for at least 10 more years.
Meanwhile, more than four out of every five respondents said they would support existing proposals such as the Responsible Homeowner Refinancing Act of 2012, sponsored by Sens. Barbara Boxer, D-Calif., and Robert Menendez, D-N.J., and the Rebuilding Equity Act sponsored by Sen. Jeff Merkley, D-Ore., that facilitates refinancing mortgage payments of underwater homeowners who are not delinquent since they would pose little to no risk to taxpayers if they received a lower interest rate.
Additionally, two-thirds of supporters said they believe that the lower monthly payments would create a significant stimulus for the economy.
However, 41% of panel respondents do not support these refinancing plans. “More than two-thirds of them said they believe that rewriting loan contracts is bad policy in general, and that lowered monthly payments for borrowers ultimately translate into taxpayer and investor losses,” said Terry Loebs, founder of Pulsenomics LLC, which conducted the survey on behalf of Zillow.