The home price picture for this year is shaping up to be a little better than it looked in June, according to the September 2011 home price expectations survey of 111 leading housing economists and experts sponsored by MacroMarkets LLC.
With just three months to go, the average prediction for the price decline this year from last year’s levels improved from a 3.52 percent price decline predicted by the experts in June to 2.53 percent in the latest survey. The survey is based upon the projected path of the S&P/Case-Shiller U.S. National Home Price Index over the coming five years.
However, longer term price prospects registered by the experts were less clear and varied widely, from a 19.2 percent increase by 2015 to a 5.7 percent decrease. The average prediction called for an average annual rate growth rate of only 1.1 percent through 2015.
“Relative to historical norms of average annual home price growth rates, the projected 1.1 percent nominal figure is dim, especially if broader inflation picks up (as many people think it will) within the coming 5 years,” says Terry Loebs, founder of Pulsenomics LLC, the firm that conducts the survey for MacroMarkets.
Loebs notes that the data still reveal a wide variety of individual views among panelists regarding a recovery in the U.S. housing market. Loebs says, “The erosion of price expectations in the face of record low mortgage rates and the wide dispersion of views among many professional forecasters are symptoms of persistent dysfunction and imbalances in this country’s housing market.”
In the September survey, the panelists also offered their views of the likelihood, desirability and necessity for further government intervention in the U.S. housing and mortgage finance markets in the coming 12 months. Almost three-quarters (73 percent) of the respondents who shared a view think that further policy action is “highly likely” or “likely,” while more than half (57 percent) said such action is undesirable, and almost half (49 percent) said additional government action is unnecessary.
“Markets and government institutions are visibly struggling to respond consistently to an unprecedented rash of crises and conflicts. These struggles diminish confidence, which compounds the underlying economic stresses and lowers expectations,” says Robert Shiller, MacroMarkets co-founder and Yale University professor of economics. “Expectations for home price performance in 2011 have become somewhat less negative. Unfortunately, the average projection is somewhat more negative for each of the following four years.”
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