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Economists Predict 2012 Housing Momentum To Carry Into 2013

 December 26, 2012 01:44 PM

(By Balaseshan) A panel of 105 economists predict 2012 housing momentum to carry into 2013 based on the projected path of the S&P/Case-Shiller U.S. National Home Price Index during the coming five years, according to the December 2012 Zillow Home Price Expectations Survey.

The panel expect home prices to rise in full-year 2012 by 4.6%, up from their more modest forecast of 2.3% in the September 2012 survey.

The economists also project home prices to rise 3.1% in 2013, up from an expectation of 2.4% in September, and by more than 3% annually through 2017. This reflects growing optimism in the housing market.

The survey of 105 economists, real estate experts and investment and market strategists was sponsored by Zillow Inc. (NASDAQ: Z) and conducted by Pulsenomics LLC.

[Related -Zillow Inc. (Z) Q2 Earnings Preview: Data Suggest Bullish Revenue Surprise]

The most optimistic quartile of panelists predicts a 6.3% increase in 2012, on average, while the most pessimistic predicts an average rise of 3%. For 2013, price change projections range from 4.9% among the most optimistic quartile to 0.8% among the most pessimistic, on average.

Changes to the mortgage interest deduction (MID) may be a key element of a fiscal cliff "grand bargain," so the panel was asked to gauge how certain proposed MID changes would impact home prices in both the near and long term.

Majority of respondents indicated prices would not be negatively affected with 55% of respondents saying there will be little to no near-term impact on overall home prices if reducing the maximum MID-eligible mortgage amount to $500,000 and eliminating the allowance for second homes.

[Related -Zillow Inc (Z) Q1 Earnings Preview: Investing For Tomorrow, but Beat Up Today?]

According to the survey, eliminating the MID entirely over a period of several years was expected to have the biggest negative impact on high-end home prices over the long-term, with 70%t of respondents saying they expected such prices to fall moderately or significantly under such a scenario.

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