Experts Sour on 2012

As the spring buying season begins, some real estate gurus are getting cold feet about prices despite reports of record low inventories and consistent increases in sales.

A quarterly survey of 104 economists, real estate experts and investment and market strategists found price optimism fading as the consensus that home prices this year lose 0.7 percent, which is more negative than their December prediction of a 0.2 percent price decline.

However, the experts still expect U.S. home prices to begin to rise in 2013, but not by as much as they expected in the December. They now predict home prices will rise 1.4 percent in 2013, compared to their previous prediction of 1.8 percent.

The expert panel’s conservatism might reflect the downturn in prices late last year or concern with the shadow inventory of foreclosures to be released on local markets by the signing of the multi-state AG settlement.

It also might reflect the experts’ less than sterling track record in recent years. The survey has been famously and consistently wrong, which is a function either of the volatility of the markets or the futility of making predictions in these tough times-or perhaps both.

For example, last June, with just six months left in the year, a majority of the experts in the survey said home prices would still bottom in 2011. At the same time, most of the survey respondents expected home prices to grow at an abysmal 2 percent per year rate until 2015. Instead, three months later the Case-Shiller price index fell to its lowest level since 2002 the fourth quarter.

A year ago last December, only 15 percent of the surveyed experts projected a double dip in home prices, which in fact occurred within the next quarter. But the biggest boo-boo by far was the May, 2010 survey which found, to quote its news release:

“According to a new monthly survey, the onset of price recovery in U.S. single family real estate is widely expected by 2011, and home prices will increase by more than 12.4 percent between 2010 and the end of 2014. The survey also revealed that home prices nationwide are expected to have risen 4.9 percent in the 12-month period ended March 2010, but fallen 0.4 percent during the most recent quarterly period measured.”

The release continued: “The survey results are important because they represent a consensus view among experts with rich and diverse knowledge. In the May survey they see only the slightest hint of a downdraft in home prices this year, and after that a respectable uptrend in prices, well ahead of the likely inflation rate,” said Robert Shiller, MacroMarkets co-founder and Chief Economist. “However, there were a number of panelists more or less sanguine than average, some significantly so, and this reflects continuing volatility and risk in the U.S. housing market. The expectations within this first survey were provided following the end of the homebuyer tax credit and of the Federal Reserve’s $1.25 trillion mortgage-backed securities purchase program. It will be interesting to see how panelist views evolve in future months.”

The survey, initially sponsored by Macromarkets and conducted by Pulsenomics, now is sponsored by Zillow.