Tight inventories of homes for sale rather than economic factors, like rising income levels  or low interest rates, are driving higher than expected increases in home prices.  Yet recent low interest rates are not creating an unsustainable increase in home values, concluded the more than 100 housing economists and experts participating in the latest quarterly Zillow Home Price Expectations (ZHPE) Survey.

Overall, the economists surveyed predicted home price appreciation would be up 4 percent year-over-year at the end of 2016, higher than predictions of 3.7 percent indicated in the previous survey.

Half of the respondents credit the recent acceleration in home value growth primarily to low inventory, rather than factors like low mortgage interest rates or wage and job growth. Nearly two thirds of the researchers disagreed that recent monetary policy decisions to keep interest rates low are causing an unsustainable increase in home values.

“Longer-term expectations for U.S. home values continue to trend slowly downward, and are at the lowest levels they’ve been since the market recovery began four years ago,” said Pulsenomics founder Terry Loebs. “After adjusting for expected inflation, the expert panel’s forecast for national home value appreciation averages 1.7 percent annually through 2020.”

Although this would mark a significant pull-back from the 3.6 percent inflation-adjusted average annual rate experienced since the start of the recovery in 2012, Loebs said that housing market stakeholders should keep the fading optimism in perspective. “During most of the decade that preceded the onset of the real estate bubble more than fifteen years ago–a relatively normal period for the U.S. housing market–nominal home values didn’t even keep up with inflation.