Survey Points to 2011 Bottom for Home Prices but No Strong Gains

After the headline news that home prices double-dipped, most forecasters are predicting a 2011 turning point for the U.S. housing market, according to the investment and risk management firm ""MacroMarkets"":http://www.macromarkets.com.
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The New Jersey-based ""company polled 108"":http://www.macromarkets.com/incl/jun2011.htm economists and real estate experts this month from the likes of BBVA Research, George Mason University, and Wells Fargo to gauge their predictions.

Nearly two-thirds of the panelists believe the bottom for home prices arrived in the first quarter or will arrive sometime before year-end.

At the same time, though, the same 69 panelists who are currently forecasting a ""turning point"" this year believe we will be treading water for several years to come with only a nominal increase in home prices of less than 2 percent average annual growth through 2015.

Robert Shiller, namesake of the closely-watched Case-Shiller Home Price Index, is co-founder and chief economist for MacroMarkets.

While the 2011 bottom would be considered a turning point, Shiller points out that the consensus among the

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panelists would best be described as a forecast of price stability rather than a rebound.

“A two percent a year home price increase will not inspire a lot of consumer confidence,” Shiller said. “Given prevailing inflation expectations, this forecast implies virtually no change in real home values going forward.”

Still, he says a “significant majority” of the panelists would label the end to the free-fall days as a crossroads for the U.S. market, “despite persistent macroeconomic uncertainty and unprecedented housing market dysfunction.”

Terry Loebs, MacroMarkets managing director, notes that the individual views of the panelists run a wide gamut.

He says looking at expected housing market performance through the five year period ending 2015, the most optimistic quartile of panelists projects 15.3 percent average price growth, while the most pessimistic quartile projects 6.0 percent average price erosion from the levels seen at the end of 2010.

“This spread is huge, representing almost $4 trillion in housing market value,” Loebs said. “This is a gut-wrenching time for market stakeholders and policymakers, because each of these scenarios is plausible.”

Overall, expectations reached their lowest levels in the June survey since the MacroMarkets panel was assembled over a year ago.

Loebs added a sobering comparison of this month’s survey data to that collected in December.

“This month, for all panelists, the average expected cumulative home price change between Q4 2010 and Q4 2015 is just 5.71 percent,” he said. “This translates to $1.2 trillion less in aggregate U.S. single-family housing wealth at the end of 2015 than projected just six months ago.”