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Economists Saw Housing Recovery Faltering Before July Sales Report

A national survey of economists and experts released yesterday found that confidence in the housing economy weakening and only one out of five predicts positive price growth this year. However, the survey of 107 economists, real estate experts, investment and market strategists was conducted during the first half of August-before the National Association of Realtors released its July sales report showing existing home sales fell a record 25.5 percent year-over-year.

“For the third consecutive month, the consensus from the experts indicates weakened overall confidence in the U.S. housing recovery, with only 21percent of our panelists now predicting positive growth in prices nation-wide for 2010, and average expected cumulative price appreciation through 2014 falling almost one-third since our inaugural survey just three months ago,” said Robert Shiller, MacroMarkets co-founder and chief economist.

A wide range of views among some of the survey panelists, and the August survey data itself, confirmed that a path to housing recovery remains intact. Terry Loebs, MacroMarkets managing director reported, “The slope of the expected recovery path, although flattening, remains positive and implies a $1.4 trillion gain in aggregate U.S. homeowner equity from current levels by the end of 2014, assuming that other relevant factors such as mortgage debt levels do not change.”

This month, MacroMarkets provided additional context for the survey expectations curve by comparing it to a “bubble-adjusted” price trend line derived from available historical data through 1999. For the third consecutive month, the majority of survey panelists expect annual U.S. home price appreciation will not exceed 3.58 percent, the average annual rate that prevailed during the 1987-1999 ‘pre-bubble’ period, until 2014.

Loebs remarked, “Nationally, home prices over-shot the pre-bubble trend more than a year ago, and as of the end of Q1 this year, were still languishing about 8 percent below that benchmark. The average data from our August survey suggests that this negative gap will widen in the coming years. Nine out of every ten panelists are now projecting that U.S. home prices will be stuck below the extrapolated pre-bubble trend line at the end of 2014.”


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