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Altos: Critics wrong about housing, it’s going to soar

2015 will see notable price appreciation

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With so many fists beating on the housing-is-facing-ruin door, Altos Research is set to release data that claims all that pounding is in vain.

Clients will begin receiving a report Wednesday afternoon, but HousingWire was able to get a sneak peek, and the results say that housing recovery critics are wrong about housing. According to Altos, it’s going to soar in 2015.

“While we see signs of demand easing, we are significantly more bullish on housing than many of the recent headlines seem to suggest,” said Altos CEO Michael Simonsen. “Based on our models, we're forecasting another year of home price appreciation, with a 7% home price increase for the year of 2015.”

Single-digit appreciation is a remarkable prediction. Many other experts anticipate depreciation in the nation’s housing market, so the Altos call is relatively noteworthy.

What’s driving the negative stand most of the market holds? The media is partially to blame, the report states.

Bearish Headlines, Bullish Reality

In the section titled, “Bearish Headlines, Bullish Reality,” the researchers state their case this way:

"In our view, these attitudes reflect a myopic view of actual market conditions and conflate concerns over the mortgage industry, the otherwise-constrained new construction market, and more broadly, the long-term financial stability of the U.S. consumer with specific current housing market supply and demand dynamics. While these are valid long-run concerns, the variables impacting home prices have proven to be driven by low available supply and growing household formation."

So what is the main driver for the Altos view that prices will rise 7%? Altos expects inventory to climb another 10%.

“As inventory and transactions rise along with pricing, participants in the housing market stand to benefit broadly,” they write. Furthermore, the number of days on market remains low compared to before the housing bust, indicating a seller’s market.

In a seller’s market, sellers can list homes at a higher value, hoping a buyer takes the bait. If not, they can also bring down the price closer to market value, while appearing to offer a sales compromise to the buyer.

Altos estimates that approximately 35% of properties will take such a price cut. Altos sees this as an indicator of strong competition, despite weaker demand overall.

The nation’s housing market, they note, continues to require a more nuanced view of its future.

“Home prices across the U.S. are poised for a fifth consecutive year of recovery. The market is still faced with low inventory and demand, buoyed by an expanding economy, which, among other factors, remains healthy,” the report concludes. “Both supply and demand conditions are moving from extreme bullish conditions to healthy condition.”

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