Of more than 100 housing market experts surveyed, a majority expect that the housing market won’t normalize for another three years, but there is light at the end of this recovery.
On average, they say, home values will exceed their pre-recession peak by February 2018. The experts said they expect national median home prices to exceed $196,400 – their 2007 peak – by that time.
That’s the sentiment of a majority of respondents to a survey by Zillow.com that include economists, real estate experts and investment and market strategists.
Of the respondents, 30 percent of panelists said they expected the market to stabilize one to two years from now, and 40 percent said it would take 3 to 5 years. Almost 20 percent said they believe the market either already has returned to normal, or will in the next 12 months.
Experts said they expect U.S. median home values to rise 4.8 percent in 2014, on average, to $176,760 — and another 3.7 percent in 2015.
“The expert consensus calls for only a marginal increase in home values nationally for the remainder of 2014, and a leveling-off of annual increases through 2019,” said Terry Loebs, founder of Pulsenomics, which conducts the quarterly survey for Zillow. “The 3.7 percent average annual appreciation rate expected by the panel for 2015 represents a 20 percent drop from the rate expected for this year.”
Although this projected decline is significant, it’s a less dramatic expectation compared to that made by experts one year ago, “when they correctly anticipated a much larger change from 2013’s 7.3 percent home value appreciation rate by projecting 4.3 percent for 2014,” Loebs said.
Negative Trend: Millennials Delaying Purchases
One trend the survey respondents noted as negatively affecting the housing market over the next few years has to do with the millennial generation (Americans born between 1982 and 2000 who have reached adulthood).
Millennials are delaying home purchases, Zillow says, “both for financial reasons, as high rents make it difficult to save, and because they are generally waiting longer to marry and have children.”
Because rent is so high, many renters are forced to find roommates to share the costs. More than a third of U.S. adults are living with a roommate, up from a quarter in 2000. As a result, household formation rates are well below average, slowing the housing market’s recovery, Zillow said.