Mortgage Professionals Should be Optimistic About the Future

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52 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS The laTesT survey: another Few years left in recovery Real estate experts point to the falloff in new household formations as major headwind. W ith home price appreciation leveling off and economic hurdles weighing on homeownership, experts expect the housing market still has at least another three years of recovery left to get back to a "normal" state, a new survey finds. In a quarterly survey of more than 100 real estate experts and economists, real estate data firm Zillow found 40 percent of respondents believe it will take another three to five years for the housing market to normal- ize, based on current home price trends and homebuyer activity. Nearly a third of panelists took a more optimistic view, predicting the market will stabi- lize one to two years from now, while one in five responded that housing has either already returned to normal or will within the next 12 months. When asked about headwinds facing the market right now, respondents pointed to low household formation rates, which have been stymied in part by a challenged economy. According to another recent study from Zillow, more than a third of adults living in the United States were living with at least one roommate in 2012, up from a quarter of the adult population that split their housing costs with another person in 2000. While those renters represent millions of potential new home- buyers in the years to come, they remain stuck where they are as jobs and wages grow at an anemic rate. Demographic issues are also at play, Zillow says. While more millennials seem to be holding off on major commitments—including home- ownership, marriage, and parenthood—a growing number of Americans nearing retirement age are also opting to stay in their homes longer, keeping the nation's housing inventory from making any meaningful recovery. "We've reached a point in the recovery where the only real cure-all is time," said Zillow's chief economist, Dr. Stan Humphries. "[T]he landscape is slowly chang- ing, as incomes begin to grow, negative equity fades, and new households start to form. These shifts won't occur overnight, but they are happening. Patience will be a virtue over the next few years as we wait for these tradi- tional fundamentals to more fully take hold in the market." Zillow's panel of experts also offered their predictions of the path home values will take over the next five years. According to the company's report, respon- dents predicted U.S. home values will end 2014 up an average of 4.8 percent from 2013, with a median price of $176,760. Gains in 2015 are expected to average 3.7 percent before leveling off in subsequent years. On aver- age, respondents said they expect home values to exceed their pre- recession peak in February 2018 at the predicted growth rate. "The 3.7-percent average an- nual appreciation rate expected by the panel for 2015 represents a 20-percent drop from the rate ex- pected for this year," said Terry Loebs, founder of Pulsenomics, which conducts the survey for Zillow. "Although this projected decline is significant, it's a less dramatic call compared to that made by our panelists 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."

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