This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Bubble Fears Emerge As Experts Predict Home Value Appreciation Will Remain Above 5 Percent This Year

Stocks in this article: Z

SEATTLE, May 7, 2013 /PRNewswire/ -- More than 100 forecasters said they expect the Zillow® Home Value Index (ZHVI)[i] to end 2013 up an average of 5.4 percent year-over-year, and most expressed some fears the Federal Reserve could be inflating a new housing bubble, according to the latest Zillow Home Price Expectations Survey.

The survey of 105 economists, real estate experts and investment and market strategists was sponsored by leading real estate information marketplace Zillow, Inc. (NASDAQ: Z) and is conducted quarterly by Pulsenomics LLC. Panelists said they expected median U.S. home values to rise to $165,280, on average, by the end of 2013. At the end of 2012, the U.S. Zillow Home Value Index stood at $156,800.

In the last survey, conducted in late February and early March, respondents said they expected average home value growth of just 4.6 percent in 2013. Looking forward, respondents predicted average home value appreciation of 4.4 percent in 2014, up from prior expectations of 4.2 percent.

But while panelists were more bullish on near-term home value appreciation this year and into 2014, their expectations for nationwide home value growth in 2015, 2016 and 2017 were slightly more pessimistic than in prior surveys. On average, panelists said they expect annual home value growth between 3.5 percent and 3.7 percent from 2015 through 2017, down modestly from previously expressed expectations in the 3.6 percent to 3.8 percent range. Cumulatively, survey respondents predicted home values to rise 22.3 percent, on average, through 2017.

"The panel's expectations of near-term home value appreciation remaining above historic norms are consistent with a market struggling to satisfy strong demand from buyers attracted by rock-bottom interest rates and improving economic conditions," said Zillow Chief Economist Dr. Stan Humphries. "But looking further out, that appreciation will have to moderate as interest rates rise, or else homes that seem affordable today – despite rapidly rising values – are going to look very expensive relative to people's incomes as it gets more costly to finance a home. How the Federal Reserve handles the eventual winding down of its policy of quantitative easing will be critical in determining if the current period of rapid appreciation is a benign bounce off the bottom, or a more dangerous bubble being re-inflated."

The most optimistic quartile[ii] of panelists predicted a 6.6 percent annual increase in home values in 2013, on average, while the most pessimistic quartile[iii] predicted an average increase of 4.2 percent. Expectations among both the optimists and pessimists were up from prior predictions of 6.1 percent and 3 percent, respectively. Expectations for cumulative home value changes through 2017 ranged from 32.8 percent, on average, among the most optimistic quartile to 12.3 percent among the most pessimistic.

Fears Of A New Housing Bubble Emerge

The latest Zillow Home Price Expectations Survey asked the panel if the Federal Reserve's current monetary policy aimed at keeping mortgage interest rates near historic lows risked inflating a new housing bubble. Just 4 percent of respondents said they saw no risk of a new bubble; 48 percent said they saw a little risk; and another 48 percent said there was a moderate to high risk of a new housing bubble forming as a result of current policies.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs