Economists expect home prices to rise by a total 2.3 percent during 2012, and overall have become more bullish on home prices than they were in the second quarter, according to the September 2012 Zillow Home Price Expectations Survey, compiled from 113 responses from a diverse group of economists, real estate experts and investment and market strategists. The survey, sponsored by Zillow Inc. and conducted by Pulsenomics LLC, is based on the projected path of the S&P/Case-Shiller U.S. National Home Price Index during the coming five years.
Survey respondents expect home prices to increase in full-year 2012 by 2.3 percent, up from their forecast of -0.4 percent in the June 2012 survey. Respondents have also revised their forecasts for 2013-2016, predicting steadily increasing home values in each year.
"This is further evidence that we're seeing a true recovery in the housing market," said Zillow Chief Economist Dr. Stan Humphries. "Not since mid-2010, in the midst of the homebuyer tax credits, have we seen this group so bullish on housing. It's refreshing to see this optimism at a time when the market seems to be making an organic recovery, in the absence of an artificial stimulant like the tax credits."
The most optimistic quartile of panelists predicts a 4.4 percent increase in 2012, on average, while the most pessimistic predict an average increase of 0.3 percent.
Additionally, respondents overwhelmingly favor changes to the mortgage interest deduction. Ten percent believe it should be eliminated as soon as possible; 50 percent believe it should be eliminated, but phased out gradually; and 30 percent believe it should remain, but that more restrictions should be placed on eligibility. Only 11 percent believe it should remain as-is.
"Although the mortgage interest deduction remains enormously popular with existing and aspiring homeowners, it costs the federal government about $90 billion a year," said Pulsenomics LLC Founder Terry Loebs. "Time will tell whether the unprecedented fiscal challenges facing the U.S. coupled with a housing market now on the mend will embolden more policymakers to touch this lightning rod."
The panel also weighed in on expectations for the housing policies of the presidential candidates and the exercise of eminent domain to seize mortgages secured by underwater homes. Responses are below.
