US home prices could increase by up to 4.9% in 2013
A nationwide panel of more than 100 professional forecasters in the United States expects home prices to rise 3.1% in 2013 after finishing 2012 up more than 4.6%. The findings from the December 2012 Zillow Home Price Expectations Survey reflect growing optimism in the housing market.
The survey of 105 economists, real estate experts and investment and market strategists is based on the projected path of the S&P/Case-Shiller US National Home Price Index during the coming five years. Survey respondents said they expect home prices to have increased in 2012 by 4.6%, a considerable rise from their more modest forecast of 2.3% from the September 2012 survey. Respondents also indicated they expect home prices to rise 3.1% in 2013, up from an expectation of 2.4% in September, and by more than 3% annually through to 2017.
‘An organic recovery in the housing market really took hold in the latter half of 2012, and this improvement is echoed in some of the most optimistic price projections we’ve seen in years from this group,’ said Zillow chief economist Stan Humphries, ‘Record levels of affordability and an improving overall economic picture have really helped buoy the market and have us well positioned for continued growth, albeit slightly slower, in 2013 and beyond,’ he explained.
The most optimistic quartile of panelists predicts a 6.3% increase in 2012, on average, while the most pessimistic predicts an average increase of 3%. For 2013, price change projections range from 4.9% among the most optimistic quartile to 0.8% among the most pessimistic, on average. The panel was also asked to gauge how certain proposed changes to the mortgage interest deduction (MID) system may affect the real estate market. The survey examined three scenarios: reducing the maximum MID eligible mortgage amount to $500,000 and eliminating the allowance for second homes; capping all itemized deductions, including the MID, at $25,000 per year; and eliminating the MID over a multi year period.
There was only one instance in which a majority of respondents indicated prices would not be negatively affected with 55% of respondents saying that the first scenario outlined above would have little to no near term impact on overall home prices. Eliminating the MID entirely over a period of several years was expected to have the biggest negative impact on high end home prices over the long term, with 70% of respondents saying they expected such prices to fall moderately or significantly under such a scenario.
Quote from PropertyCommunity.com : “Existing home sales in the United States rose by 5.9% last month are now at their highest level since November 2009, according to the National Association of Realtors. Total sales, which are completed transactions that include single family homes, town homes, condominiums and co-ops, are now 14.5% higher than a year ago.”
‘If adopted, any measure to limit or repeal the MID will result in distinct price impacts over time and by market segment, and our survey data are consistent with this view,’ said Pulsenomics founder Terry Loebs. For example, in the event that the maximum MID eligible mortgage amount is reduced from $1 million to $500,000 and the deduction allowance for second homes is eliminated, the majority of respondents expect high end home prices to fall while US home prices overall experience little or no price impact.