Home Prices Over the Next Five Years

This past July, the quarterly Home Price Expectation Survey was released. This report contains the results of a nationwide survey of over 100 economists, real estate experts and investment and market strategists. These 100 gurus were asked where they believe home prices are going over the next five years. Here are some of the results:

The chart below shows the average annual appreciation of home prices (the percentage that prices of homes went up each year) over the last 26 years.

August2013-38

During the Pre-Bubble (1987-1999–before the real estate roller coaster ride began), the average annual appreciation of home prices was 3.6%. During the bubble (June 2000-May 2007), that number more than doubled.

But, as we know, what goes up must come down, and from June 2007 until October 2011, that percentage dropped dramatically to -5.8% (aka the Bust).

As we entered the recovery period and up until now, the average annual appreciation rose to a positive 4.7%. The experts surveyed believe that this percentage will hold from now until 2017.

Now let’s look at the next five years broken down:

August2013-40

The experts are projecting that this year we will see a 6.7% increase over last year. Some feel that perhaps the pendulum has swung too far in the other direction and that this year is an example of a correction to the anomaly of the Bust.

As we move into 2014, the projected percentage increase is 4.2% followed by 3.6% for 2015, 3.5% for 2016 and 3.4% for 2017. So, we are seeing accelerated appreciation this year, a bit during the next year, and then after that we will go back to a normal market that resembles that of the Pre-Bubble years (3.6% annual average appreciation from 1987-1999).

Tomorrow we will take a look at differing opinions of the experts regarding the cumulative appreciation of homes by 2017 (In other words, if I buy a house today, what will it be worth in 2017?).

Also, this week we will delve into the latest question that is abuzz for many buyers and sellers: Is there a new housing bubble forming? (The answer is no, and we’ll see why!)

Until then, have a great Labor Day!

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