Zillow: Housing won’t normalize for at least 3 years

“The only real cure-all is time”

While a small percentage of people said they believe the housing market either already has returned to normal, or will in the next 12 months, 40% said it would take 3-5 years, which would be close to the ten-year anniversary of the financial crisis.

According to a recent survey by Zillow (Z) that interviewed 107 panelists, shifting demographics and would-be first-time homebuyers financially ill-prepared to buy will continue to hold back the housing market over the next several years.

The survey interviewed 107 panelists, asking them to predict the path of the Zillow home value index into 2019.

When asked when they expect the U.S. housing market to normalize, 30% of panelists said they expected the market to stabilize one to two years from now, and 40% said it would take 3-5 years. Just 20% said they believe the market either already has returned to normal, or will in the next 12 months.

“We’ve reached a point in the recovery where the only real cure-all is time,” said Zillow Chief Economist Stan Humphries. “The market remains very challenging for younger, first-time homebuyers who face an uphill battle saving for a down payment, qualifying for a mortgage and finding an affordable home to buy.”

Then at the other side of the age spectrum, many older homeowners are trapped underwater or are unable to find buyers for their homes.

But Humphries noted that it is not all bad news. “The landscape is slowly changing, as incomes begin to grow, negative equity fades and new households start to form. These shifts won’t occur overnight, but they are happening. Patience will be a virtue over the next few years as we wait for these traditional fundamentals to more fully take hold in the market,” he explained.

Additionally, panelists said they expect U.S. median home values to rise 4.8% in 2014, on average, to $176,760, and another 3.7% in 2015.

The national median home-price is predicted to exceed $196,400 – their 2007 peak –in February 2018.

“The expert consensus calls for only a marginal increase in home values nationally for the remainder of 2014, and a leveling-off of annual increases through 2019,” said Terry Loebs, founder of Pulsenomics, which conducted the survey.

“The 3.7% average annual appreciation rate expected by the panel for 2015 represents a 20% drop from the rate expected for this year. Although this projected decline is significant, it’s a less dramatic call compared to that made by our panelists one year ago, when they correctly anticipated a much larger change from 2013’s 7.3% home value appreciation rate by projecting 4.3% for 2014,” Loebs explained. 

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