Projected average annual appreciation of homes until 2018

The fourth quarter Home Expectation Survey for 2013 was recently released. This is a survey of over 100 economists, real estate experts and investment and market strategists. They were asked where they believe home prices will be by 2018. Let’s see what they predict:

November2013-36

In the graphic, you can see what the average annual appreciation percentages were for the Pre-Bubble, Bubble, and Bust periods. If you think of a pendulum, you can imagine that it swung too far during the height of the Bubble, and then drastically swung the other way during the Bust. The Recovery started around November 2011 and has continued since.

The graphic shows you that the average annual appreciation of home prices is currently at 5.1%. The pendulum definitely swung back in the opposite direction from the Bust, and some were worried it was swinging too far the other way again, toward Bubble percentages. But, with interest rates rising (minus the hiccups of this fall) and the inventories and market leveling off, the 100+ economists predict that by 2018, the average annual appreciation will be 4.2%.

Here are the percentages going forward broken down by year:

November2013-37

You can see that 2014 will have a higher annual appreciation than the years following, but the average of 3.5% is considered a more normal place to be.

Here’s one more graph:

November2013-38

This shows that according to the experts surveyed, they predicted that had the market stayed where it was during the Pre-Bubble period (what was considered a normal housing market), by 2018 the annual appreciation would have been 23.7%.

The top quarter of those surveyed, the Bulls (known for their aggressive and optimistic predictions) believe that by 2018, the average annual appreciation of homes will be 40.1%. Skipping to the last bar of the graph, the Bears (the bottom quarter of the group known for their pessimistic predictions) believe that the annual appreciation by 2018 will be at 16.8%.

Finally, the third to last bar shows all the economists’ predictions averaged together, and that percentage is 28%. If you compare what the Pre-Bubble trend would have been by 2018 (23.7%) with what all projections predict (28%), we can see that by 2018, the housing market should be in a good, healthy place, and with potentially higher average annual appreciation percentages than we would have had before the great housing debacle.

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