The Economist’s Corner—Where are house prices headed?

The Economist’s Corner—Where are house prices headed?

By Dr. Edward Seiler, vice president, Economics and Research, Dworbell, Inc.

The latest release of the National Case-Shiller home price index (from April 30) shows that the pace of house price appreciation continues to slow—down to a 4 percent annual gain—indicating that the market may be tilting back to buyers.

Each quarter I participate in the Zillow Home Price Expectations Survey (run by Pulsenomics). Home price dynamics are complex, and it is useful to gauge where they are headed by harnessing the power of the crowd (or in our case, by pooling the forecasts of many housing economists).

The good news is that house price appreciation is expected to stay positive through 2023.

The chart above shows historical national price increases from 1996 through the end of 2018 (black line) and the pre-bubble trend (blue line). After the boom, bust and recovery roller-coaster we’ve been on for the last 20 years, prices have reverted to the 3.6 percent annual growth trend.

So where do we go from here? The survey respondents’ average annual house price growth forecast through 2023 is 3.2 percent (orange dashed line), and even the pessimistic economists predict that house prices will continue to increase, albeit slowly at only 1.3 percent annually (red dashed line).