Americas are optimistic about the housing market.
Despite significant headwinds from limited inventory of entry-level homes, affordability concerns and tax law changes concerning property tax deductions, enthusiasm about both near-term and long-run home price appreciation remains robust.
A biannual survey, conducted by the research firm Pulsenomics LLC, found that owners and renters alike expect home values in their local real estate market to rise. Consumers believe that in the next 12 months the market will increase 6.1% on average and over the next decade a solid 31.1% — or about 2.7% per year — on a national level. More than 15,500 households were polled to gauge real estate market conditions and perceptions.
“At an average rate of more than 6%, household expectations for home prices over the next 12 months are remarkably high. But the expectations over the next 10 years — at 2.7% annually nationwide — are entirely tame and reasonable,” said Robert Shiller, Nobel laureate and Yale economics professor. Households are showing “a healthy optimism,” he said.
Despite lowered tax incentives for home ownership in some high-cost areas such as the New York City metro area, gains are expected to be much more robust than the national average.
“Falling mortgage rates and solid wage growth in Q1 have stoked housing expectations and home ownership aspirations,” said Pulsenomics founder Terry Loebs. In San Jose, the average home price is expected to jump by more than half-a-million dollars over the next decade. More than 80% of homes in parts of San Jose are already valued at $100 or more for every $50 owed. Thus, the expected appreciation will further benefit an equity rich area.
On a national basis, average home prices are projected to rise to $271,300 in 2029 from $207,000 in the first quarter of this year. This would be a 2.7% average annualized rate over the next 10 years. But, on a more granular basis, some metro areas are expected to sharply diverge from this rate of growth.