Zillow’s latest Home Price Expectations Survey shows that a majority of economists and investment analysts and real estate professionals feel positive about the prospective growth of U.S. property prices. The moderate view includes a prediction that price increases will slow over the coming years as the market begins to cool, which many agree will be a good thing because the current level of growth is unsustainable. Many experts also welcome a continued presence of the federal government in the mortgage market. If the market performs as expected, the projection is that prices will return to 2007 levels by 2018. For more on this continue reading the following article from Property Wire.
A survey of economists, real estate experts and investment strategists in the United States has found that many expect property prices to have grown by an average of 6.7% year on year by the end of 2013.
The Zillow Home Price Expectations Survey, which consulted 108 leading forecasters, also reveals that they then expect price growth to slow over the next five years. Many said they would like to see the federal government maintain a considerable role in the mortgage market.
While appreciation is expected to remain strong through the remainder of this year, the pace of home value growth is predicted to slow considerably through to 2018. Panelists said they expect appreciation rates to slow to roughly 4.3% next year, on average, eventually falling to 3.4% by 2018.
Based on current expectations for home value appreciation over the next five years, panellists predicted that overall US home values could exceed their May 2007 peak by the first quarter of 2018, and may cross the $200,000 threshold by the end of 2018.
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‘The housing market has seen a period of unsustainable, breakneck appreciation, and some cooling off is both welcome and expected. Rising mortgage rates, diminished investor demand and slowly rising inventory will all contribute to the slowdown of appreciation,’ said Zillow chief Economist Stan Humphries.
The most optimistic quartile of panellists predicted an 8.3% annual increase in home values this year, on average, while the most pessimistic predicted an average increase of 5.6%. Expectations among the optimists fell from 9.3% in the last survey, but rose from 5.1% among the pessimists.
The most optimistic panellists predicted home values would rise roughly 12.5% above their 2007 peaks by the end of 2018, on average, while the most pessimistic said they expected home values to remain about 6.2% below 2007 peaks.
A number of public and private plans for overhauling the nation’s mortgage finance system and reforming government sponsored entities Fannie Mae and Freddie Mac have been proposed, all of which seek to reduce and redefine the government’s role in the mortgage market to some degree.
Panelists were asked how involved they think the federal government should be in any re-imagined mortgage system. Among those panellists expressing an opinion, the majority, some 58.4%, said the federal government’s involvement in the conforming mortgage market should be somewhat significant, significant or very significant. Only 8% of respondents said the federal government should have a non-existent role in the conforming market.
Panelists were also asked to define an appropriate level of government backing for mortgage loans going forward. Among those panellists expressing an opinion about what maximum percentage of all new mortgages should be backed by the federal government, the median response was 35%, roughly the level seen in 2006 at the height of the housing bubble.
‘Policy discussions centred on reforming the nation’s housing finance system have only just begun, and it will be very interesting to see what comes out of these debates and how the market will react to new proposals,’ said Humphries.
‘How much mortgages will end up costing average consumers, and the continued availability of traditional mortgage products like the 30 year fixed rate mortgage, are among the critical issues currently at stake for consumers in these debates,’ he explained.
Currently, the federal government backs roughly 90% of all new mortgage originations in the US in some form. In 2000, prior to the property bubble, the government backed about 50% of new mortgages.
This article was republished with permission from Property Wire.