Home prices may not see the 6.4% annual growth they achieved in 2013, at least not over the next five years, according to the expectations of several real estate market experts.
A survey of 110 economists, real estate experts, investment and market strategists predict future home values will instead post appreciation that is closer to pre-bubble norms of 3%-5% per year, according to the Zillow Home Price Expectations Survey.
On average, they predict national home price growth of 4.5% through the fourth quarter of 2014.
Over a longer term, the panel of experts expect home values, on average, will rise by a cumulative value of 19.7% through the end of 2018.
Overall, the panel predicted an average annual pace of 3.7% appreciation for the next five years.
The prediction is much more in line with pre-bubble norms, Zillow notes, which averaged 3.6% annually from 1987 to 1999, compared to the average 7% annual appreciation rate experienced during 2000 to 2007 at the peak of the housing bubble.
While the expected annual price gain of 3.7% for the next five years is considerably lower than the 6.4% nationwide appreciation the U.S. experienced in 2013, Zillow indicates that median home values could exceed their 2007 peaks by as early as 2018.
“Using current home values and expectations, the appreciation rates predicted in the survey would mean that median U.S. home values could exceed their April 2007 peak by the first quarter of 2018 and may surpass the $200,000 threshold by the third quarter of 2018,” Zillow writes.
When asked about the impact of institutional investors who ramped up purchasing activity throughout the recovery, only to hold them in their portfolios, 79% of panelists felt these investors pulling back in 2014 would be “significant” or “somewhat significant.”
“This investor activity helped keep sales volumes high, but also contributed to a shortage of homes for sale and rapid spikes in some areas, which squeezed out may would-be buyers,” Zillow writes.
Another 57% believe these investors would sell the majority of homes in their portfolios within the next three to five years, which will as a result raise inventory and decrease buyers competing with “all-cash offers” from investors when trying to purchase a home.
Written by Jason Oliva