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Experts Cite Flat Wages, Tight Inventory Among Most Likely Reasons for Affordability Concerns

Median U.S. home values expected to end 2014 up more than 4%, could exceed pre-recession peak by Q1 2018, according to Zillow Home Price Expectations Survey

May 16, 2014

SEATTLE, May 16, 2014 /PRNewswire/ -- More than 100 experts are split on the root causes of mounting housing affordability concerns in several large housing markets nationwide, and expect home values to end the year up 4.4 percent, on average, according to the latest Zillow® Home Price Expectations Survey.

The survey of 106 economists, real estate experts and investment and market strategists asked panelists to predict the path of the U.S. Zillow Home Value Indexi through 2018 and solicited opinions on the main cause of declining home affordability. The survey was sponsored by leading real estate information marketplace Zillow, Inc. and is conducted quarterly by Pulsenomics LLC.

While low mortgage rates are keeping homes within reach of consumers across most of the country, affordability is becoming an issue within a number of markets, including the largest California metro areas, according to a recent Zillow study.

Panelists were asked to identify the primary cause of declining affordability from a list of five choices. Responses that gained the largest support among those with an opinion were stagnant income growth (28 percent), abnormally high rates of home price and rent appreciation (27 percent) and an abnormally low supply of homes currently available for sale or rent (21 percent). Many also pointed to a generally insufficient number of homes (13 percent) and tight credit (11 percent).

"Given all of the distortions currently affecting the housing market, one could probably make the case that things could, and maybe should, be a lot worse. We're certainly in a better spot than we were just a couple years ago, but the housing market remains far from anyone's definition of 'normal,'" said Zillow Chief Economist Dr. Stan Humphries. "Inventory is being held back by stubbornly high negative equity, which means supply can't keep up with demand, in addition to low rates of new home construction. Additionally, many more would-be buyers are stymied by tight credit or an inability to save for a down payment. And finally, despite a generally improving economy, incomes have not risen at the same level as home values and rents, leading people to spend an ever-larger share of their pay on housing. It will take years for these issues to either be adequately addressed through policy, or to naturally work themselves out of the market."

Those panelists who indicated that abnormally high rates of home value and rent growth were most to blame for decreasing affordability were also asked if those price spikes might risk inflating a new bubble. More than 90 percent of respondents said these price spikes were either already inflating a bubble, or had a moderate to high risk of inflating one.

On average, panelists said they expect nationwide home value appreciation of 4.4 percent through the end of this year, to a Zillow Home Value Index of $176,380. Panelists said they expect home value appreciation to slow to 3.8 percent by the end of 2015, on average, and to 3.4 percent through 2016. During the pre-bubble years from 1987 to 1999, home values grew at 3.6 percent per year.

The most optimistic groupii of panelists predicted a 5.8 percent annual increase in home values this year, on average, while the most pessimisticiii predicted an average increase of 3.2 percent. On average, panelists said they expected U.S. median home values to exceed their pre-recession peaks by Q1 2018. The most optimistic panelists predicted home values would rise roughly 12.6 percent above their 2007 peaks by the end of 2018, on average, while the most pessimistic said they expected home values to remain about 5.9 percent below 2007 peaks.

"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 in the four-year history of this survey," said Terry Loebs, Founder of Pulsenomics. "These data are consistent with a growing uncertainty about how and when conditions in U.S. housing markets will normalize. 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."

About Zillow:
Zillow, Inc. (NASDAQ: Z) operates the largest home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. The Zillow, Inc. portfolio includes®Zillow Mobile, Zillow Mortgage MarketplaceZillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Agentfolio®, Mortech®, HotPads™ and StreetEasy®. The company is headquartered in Seattle., Zillow, Postlets, Mortech, Diverse Solutions, StreetEasy, Agentfolio and Digs are registered trademarks of Zillow, Inc. HotPads is a trademark of Zillow, Inc.

About Pulsenomics:
Pulsenomics LLC ( is an independent research and consulting firm that specializes in data analytics, new product and index development for institutional clients in the financial and real estate arenas. Pulsenomics also designs and manages expert surveys and consumer polls to identify trends and expectations that are relevant to effective business management and monitoring economic health. Pulsenomics LLC is the author of The Home Price Expectations Survey™, The U.S. Housing Confidence Survey, and The U.S. Housing Confidence Index. Pulsenomics®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.

i The Zillow Home Value Index is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.
ii Based on the 25 percent most optimistic panelists in terms of cumulative home price change through 2018.
iii Based on the 25 percent most pessimistic panelists in terms of cumulative home price change through 2018.

SOURCE Zillow, Inc.

For further information: Cory Hopkins, Zillow, 206-757-2701 or