Rising Prices and Rising Expectations

Expectations are rising for home price appreciation, according to the 2017 Q4 Zillow Home Price Expectations Survey. Home prices have continued to rise, and showed no signs of slowing.

Zillow  sponsors a quarterly survey, conducted by Pulsenomics LLC, which asks more than 100 housing experts, market strategists, and economists what to expert for the U.S. housing market in 2018. The survey has revealed a steady uptick in home price increase, pushed along by the struggling supply over 33 straight months.

Zillow reports that although overall new construction picked up slightly toward the end of 2017, single-family construction was still plagued by a slow pace. Only 16.7 percent of experts who responded to the survey believe that this pace will change. This means the limited inventory may continue into 2018.

"The American labor market is stronger than it's been in decades and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes," said Zillow Senior Economist Aaron Terrazas. "Home building has not kept pace with this surge in demand and remains well below historical norms. We don't expect that these demand-supply imbalances will fundamentally shift in 2018: Demand will continue to grow and, though supply should increase somewhat, we still won't build enough new homes to meet this demand, contributing to higher prices. Higher mortgage rates will eat into buyers' budgets, putting even more price pressure on the most affordable homes for sale. Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market."

The 30-year fixed mortgage rate is predicted jump from 3.92 percent to between 4.28 percent and 4.70 percent, with a median prediction of 4.28 percent.

According to Pulsenomics Founder Terry Loebs, most of the experts surveyed believe the nation-wide rate of increase will diminish in the near future. "All but two of the 108 panelists who responded to this quarter's survey expect weaker home value growth next year relative to 2017, and panel-wide, returns are expected to average less than three percent per year after 2018," said Loebs. "In a low-inflation environment, nominal housing gains in the three- to four-percent neighborhood will still create homeowner wealth at a pace exceeding the pre-bubble norm."

Zillow’s Home Price Expectations survey can be found here.