With more than 100 forecasters predicting Zillow’s Home Value Index could end the year up an average of 5.4% from last year, fears of a market bubble resurfaced.
According to the latest Zillow ($62.94 0%) Home Price Expectations Survey, the median U.S. home value is expected to rise to $165,280, on average by the end of 2013.
At the end of 2012, the U.S. Zillow Home Value Index stood at $156,800.
In the latest survey, conducted in late February, respondents reported they expected average home value growth of just 4.6% in 2013. In 2014, respondents predicted average home value appreciation of 4.4%, up from prior expectations of 4.2%.
While panelists were more skeptical on near-term value appreciation this year and into 2014, their expectations for nationwide home value growth in 2015, 2016 and 2017 were slightly more pessimistic than in prior surveys.
Panelists said on average they expect annual home value growth between 3.5% and 3.7% from 2015 through 2017. This is a modest drop from previously expressed expectations in the 3.6% to 3.8% range.
Cumulatively, respondents anticipate home values to rise 22.3% through 2017, on average.
“The panel’s expectations of near-term home value appreciation remaining above historic norms are consistent with a market struggling to satisfy strong demand from buyers attracted by rock-bottom interest rates and improving economic conditions,” said Zillow Chief Economist Stan Humphries.
Humphries added, “But looking further out, that appreciation will have to moderate as interest rates rise, or else homes that seem affordable today – despite rapidly rising values – are going to look very expensive relative to people’s incomes as it gets more costly to finance a home. How the Federal Reserve handles the eventual winding down of its policy of quantitative easing will be critical in determining if the current period of rapid appreciation is a benign bounce off the bottom, or a more dangerous bubble being re-inflated.”
The more optimistic quartile of panelists predicted, on average, a 6.6% rise in home values in 2013. However, the pessimistic bunch expects an average increase of only 4.2%.