Economists Predict Where Home Prices Are Heading

June 26, 2012

A majority of more than 100 economists and real estate experts say that home prices will likely bottom by 2013, according to the Zillow June 2012 Price Expectations Survey. The real estate experts surveyed predict that home prices will fall 0.4 percent this year before inching up by 1.3 percent next year. 

The worst of the price drop for this year may already be behind the market. Prices dropped 2 percent in the first quarter of this year, and the majority of those surveyed say that they expect home prices for the rest of the year to increase. 

The experts predict the average cumulative appreciation in U.S. home prices to be about 3.5 percent between 2012 and 2014. 

But with the forecast for rising home prices, 56 percent of the economists surveyed had more modest predictions for the home ownership rate. More than half of those surveyed say that in five years the U.S. home ownership rate will likely drop below 65.4 percent to 63 percent. That would put it closer to one of the lowest home ownership rates on record--62.9 percent recorded in 1965. 

“It’s good to start to see some convergence of expectations among economists, as it lends further support to the claim that a bottom is real,” says Stan Humphries, Zillow’s chief economist. “However, the fact that more than half of respondents believe that the home ownership rate will fall lower should be a sobering reminder that significant challenges remain ahead for the housing market, from negative equity to millions of foreclosed home owners who now have impaired credit, making a return to home ownership harder than it would be otherwise.” 

Source: Zillow Inc.

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