A huge panel of economists from banks, universities, and investment and research firms weighed in on the direction of U.S. home prices over the next five years.
The consensus was average home price appreciation of 21.99% through 2017, growth that exceeds what Zillow refers to as “pre-bubble rates,” which took place from 1987 to 1999.
During that time period, home prices appreciated annually at a rate of 3.6%, on average.
2013 Strongest of Next Five Years
The 118 panelists indicated that 2013 would be the strongest year in terms of home price appreciation, with values expected to climb an average of 4.6%.
That compares to the 5.5% gain seen in 2012, meaning there should be some moderation despite the positive sentiment.
In 2014, prices are expected to rise another 4.2%, and then dip to between 3.6% and 3.8% for 2015-2017.
All in all, it’s another sign that housing has indeed bottomed, and should slowly work its way back to previous highs seen before the crisis hit.
Who’s the Most Optimistic?
I decided to scour the list of panelists to see first who was included, and second what they thought.
There is an interesting mix of participants on the list, and an even more intriguing divergence of opinion.
Let’s start by looking at who is most confident about home prices going forward, with the cumulative total displayed below:
1. Ethan Penner, Managing Partner at Monday Real Estate Partners – 77.86%
2. David Wyss, Economist at Brown University – 41.53%
3. Christine Chmura / Xiaobing Shuai, Chief Economist / Senior Economist at Chmura Economics & Analytics – 40.22%
4. Rajeev Dhawan, Director, Economic Forecasting Center at Georgia State University – 38.46%
5. Jim Kleckley Director, Bureau of Business Research at East Carolina University – 37.75%
6. Joel Naroff, President at Naroff Economic Advisors Inc. – 37.10%
7. Aneta Markowska, Senior U.S. Economist at Societe Generale – 36.17%
8. Matthew Sippel, Senior Partner at Indus Capital Partners – 35.05%
9. Richard Dorfman, Managing Director at SIFMA – 33.81%
10. Constance Hunter Senior Advisor at International Solutions Network – 32.59%
[Tips for first-time home buyers.]
Who Are the Housing Bears?
Not all panelists were as optimistic as those listed above. In fact, some even feel housing prices will fall over the next five years.
Let’s take a closer look at who thinks housing isn’t the best investment at the moment:
1. John Brynjolfsson, Chief Investment Officer at Armored Wolf, LLC – (11.04%)
2. Mark Hanson, Founder at Hanson Advisors – (8.39%)
3. Gary Shilling, President at A. Gary Shilling & Co. – (5.05%)
4. Barry Ritholtz, CEO at FusionIQ – 7.15%
5. Alex Barron, Founder & Senior Research Analyst at Housing Research Center – 10.36%
6. Komal Sri-Kumar, President at Sri-Kumar Global Strategies, Inc. – 10.38%
7. Parul Jain, Chief Investment Strategist at MacroFin Analytics LLC – 10.41%
8. Paul Ballew, Chief Data and Analytic Officer at Dun & Bradstreet, Inc. – 10.84%
9. Ellen Zentner / Aichi Amemiya, Senior Economist / VP at Nomura Securities International, Inc. – 12.03%
10. Ihab Seblani, Economist at AIG Global Economics – 12.42%
As you can see, the panelists exhibit quite a range in outlook, with some so negative they actually expect home prices to be down five years from now.
However, the lion’s share of panelists sound pretty darn positive, if the numbers are any indication.
Overall, the most optimistic quartile of panelists predict a 6.1% increase in home prices this year, while the most pessimistic quartile sees an average increase of three percent.
When looking at the five-year cumulative total, projections ranged from 11.7% among the most pessimistic quartile to 34.2% among the most optimistic.
For the record, Zillow chief economist Stan Humphries sees home prices rising 18.42% over the five-year period.
You can see the complete list here. There are some other interesting names on the list not mentioned in this post.
As always, you should take anyone’s opinion with a grain of salt. Plenty of so-called experts were wrong leading up to the past crisis, and many will be wrong again. That’s just life.
Also note that this covers national home prices, and that values will vary widely by city, region, etc.
Read more: Preparing for the seller’s market.