Experts Undecided on Cause of Affordability Concerns

A new survey from Zillow finds real estate and investment experts divided on the culprits behind affordability concerns in the U.S. housing market. A total of 106 economists, real estate experts, and investment and market strategists participated in the survey conducted by Zillow. The survey found a slight majority mostly blaming declining affordability on stagnant income growth across the country. In addition, 27 percent of respondents pointed to “abnormally high rates of home price and rent appreciation” as the main problem. The third most commonly cited answer was the “abnormally low supply of homes currently available for sale or rent.”
Dr. Stan Humphries, chief economist for Zillow, says “one could probably make the case that things could, and maybe should, be a lot worse.” He noted that tight credit is also an issue for those looking to enter the housing market. “We are certainly in a better spot than we were 2 years ago, but the housing market remains far from anyone’s definition of ‘normal’. It will take years for these issues to either be adequately addressed through policy, or to naturally work themselves out of the market.” Humphries added.
Historically low mortgage rates are assisting in the affordability of homes in most markets, but Zillow notes that a number of metro areas in California are seeing issues with cost. Another note from the survey is concern of price growth inflating a new bubble if it continues at such a high pace. Panelists in the survey are forecasting an average of 4.4 percent appreciation through the end of the year. This is nearly one point above the historical average of 3.6 percent. Predictions of this year have ranged from a low of 3.2 to a high of 5.8 percent.
Terry Loebs, founder of the company which conducts the quarterly survey for Zillow, stated “After narrowing over the past year, in this quarter, the spread between the forecasts of the most optimistic and pessimistic groups not only expanded, but widened by a degree we have not seen the four-year history of this survey. Time will tell whether Washington’s unfolding plan to expand mortgage credit will have a durable, positive impact on home values, housing confidence, and market expectations.”