Economists, real estate experts, and investment and market strategists expect annual home value appreciation rates to end 2013 on a strong note before slowing down considerably over the following three years, according to a Zillow survey.
Based on 106 responses, forecasters expect the Zillow Home Value Index to finish 2013 up an average of 6.7% year-over-year.
However, home prices are then projected to rise at a more moderate pace from 2014 through 2017, up 4.4%, 3.5% and 3.4%, respectively, in those years.
“Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand and low inventory,” said Svenja Gudell, senior economist for Zillow. “Combined, these factors will continue putting upward pressure on home values for the next few months.”
The panelists forecasted median U.S. home values to rise to $167,480 by yearend, up from $156,900 at the end of 2012. The average home price is now $161,100.
Furthermore, based on current expectations for home value appreciation over the next five years, survey respondents predicted record-high home prices by December 2017, which would come close to the previous peak of $194,600 set in May 2007.
“But the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise and more inventory becomes available,” Gudell added.
“Over the next few years, these trends will help the market stabilize and will bring home value appreciation more in line with historic norms. As long as mortgage interest rates don’t rise too far too fast, most markets should be able to absorb these changing dynamics while still remaining healthy.”
After the largest three-month gain in mortgage rates since 2003, the panelists were also asked whether an uptick in rates posed a significant threat to the ongoing housing market recovery, in which 88% said no. A follow-up question was asked to these respondents who answered “no” or “not sure” as to what the minimum mortgage interest rate on a 30-year, fixed-rate mortgage would have to be to effect the recovery and 61% said rates need to rise at least 6% to create any real threat.
