With the official peak now 5 years behind us, the outlook for home prices still looks dim. MacroMarkets surveys leading housing economists on a quarterly basis and the 5 year outlook offers housing little to be excited about. Home prices are expected to rise just 1.1% during that time according to 111 housing economists and real estate experts. This is an improvement over the past 5 year decline of 7.1%, according to the S & P Case Schiller Home Price Index.
Factors such as red tape from short sales, a decimated new construction market, and a dysfunctional mortgage market are just a few of the industry reasons for the stymied recovery. Many borrowers remain underwater and unable to take advantage of the low interest rates and record high affordability the market is offering.
Several of the housing experts surveyed expect the government to enact policy to jump start the housing market. I agree with this and feel a refinancing initiative would allow many Americans to reset the debt and free up valuable disposable income which would be reinvested into the economy. Peter Orszag of BusinessWeek suggests we rent our way to a recovery. In the meantime, investors in real estate can provide much needed liquidity to the housing market, absorb vacant housing, and create returns through leasing properties out. Hey, it’s a step in the right direction.
Below I’ve used data provided by Pulsenomics and Macromarkets to reconstruct their U.S. Home Prices chart.
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