A June survey of more than 100 real estate experts, economists and market strategists shows diminished optimism for gains in house prices by the end of the year — but the wide range of prognostications show that even the smartest guys in the room can’t say for sure what’s to come.
More than half of the panelists projected price declines for 2010, compared with 40 percent in last month’s survey, said Robert Shiller, MacroMarkets co-founder and chief economist. The monthly survey from MacroMarkets is based on the projected path of the S&P/Case-Shiller U.S. National Home Price Index over the next five years.
The average forecast showed a price drop of 1.36 percent, but predictions varied wildly. For example, Dean Baker, co-director of the Center for Economic Policy & Policy Research, predicted a 12 percent price decline by the end of 2010 and a cumulative price decline of 6.22 percent over the next five years.
The panelists’ average prediction was a 10.5 percent home price gain by 2014. That outlook translates roughly to a $1.7 trillion increase in total household wealth by the end of that year, “all other things the same,” said Terry Loebs, MacroMarkets managing director.
“This increase would still be a massive stimulus for the economy, especially if inflation remains tame. However, the spread of the panelists’ five-year views underscores the persistence and magnitude of home price risk, and the stakes in managing them effectively.”
Indeed, other panelists were hugely bullish on the prospects for price increases. Joe LaVorgna, chief U.S. economist for Deutsche Bank, predicted a 2.5 percent increase by the end of this year — but a cumulative increase of 36.74 percent by 2014.
