Strong fundamentals and credit, low likelihood
of crash underpin survey results
- Sixty percent of housing experts polled by Zillow don't believe
the housing market is in a bubble, compared to 32% who do.
- A short recession is expected by the panel by 2024 as the
Federal Reserve works to tame inflation.
- The panel raised home price growth forecasts for 2022 as demand
stays strong.
SEATTLE, June 7, 2022
/PRNewswire/ -- As home prices continue to break growth records, a
panel of housing experts and economists surveyed by Zillow® does
not believe the market is in a bubble. The latest Zillow Home Price
Expectations Survey1 polled more than 100 experts from
academia, government and the private sector to gather their
opinions on the state of the housing market and future growth,
inflation forecasts and recession risks.
Of those surveyed, 60% said they do not believe the U.S. housing
market is currently in a bubble, compared to 32% who think we are
in a bubble, and 8% who are not sure.
"Americans have seen home values rise at record rates over the
past few years. But although a recession is looking more and more
likely, the housing market today is a far different beast than what
we saw in the mid-2000s," said Zillow economist Nicole Bachaud. "Unlike in 2006, this market is
underpinned by strong fundamentals and has been built on mortgages
with sound credit, factors that won't change in the near
term."
The most popular reason for respondents rebuffing the bubble
thesis is strong market fundamentals, including demographics,
scarce inventory and shifting housing preferences. Low credit risks
as a justification followed, due to sound loan underwriting and the
overwhelming share of fixed-rate, fully amortized mortgages.
Another large group of respondents reject the term "bubble," which
implies a subsequent crash that they do not believe is
imminent.
Among those who do believe we're in a bubble, unaffordable
prices in the absence of record-low mortgage rates is the chief
rationale.
Can the Fed thread the needle?
While the panel largely does not believe the housing market is
in a bubble, it does foresee a recession coming soon.
The Federal Reserve is working to strike a balance between twin
mandates of reducing rampant inflation and avoiding a recession.
Those polled by Zillow are skeptical that this "soft landing" will
be achieved, as 56% of survey respondents do not expect the Fed to
materially reduce inflation while averting a recession. The
remaining respondents are cleanly split, with half believing that
the Fed will be successful in avoiding a recession while reducing
inflation, and the other half not being sure.
Of those who doubt a soft landing will happen, three-fourths see
a short recession as the most likely economic outcome.
When will the next recession hit?
The largest portion of the panel (45%) expects the next U.S.
recession to begin in 2023, which gathered more votes than 2022
(30%), 2024 (8%) or 2025 and beyond (17%).
"Although the Great Recession was triggered by a housing crash,
it's an outlier in the grand history of recessions, which have
often strengthened investment in housing due to its relative
stability as an asset," Bachaud said.
Home price expectations still rising
Despite a more than 100-basis-point increase in mortgage rates
since the previous survey just three months ago and the potential
for higher rates in coming months, the panel's expectations for
2022 home price appreciation still rose to 9.3% from 9.0% last
quarter.
"Rapidly rising mortgage rates and looming recession risk
threaten to tame the pandemic's hurricane-force winds that have
whipped the market landscape and propelled U.S. home prices
skyward," said Pulsenomics founder Terry
Loebs. "With home values at record-high levels and a vast
majority of experts projecting additional price increases this year
and beyond, home prices and expectations remain buoyant. Even among
those panelists who believe the U.S. housing market is now a
bubble, most expect it to gradually deflate, not suddenly
burst."
1 This edition of the Zillow Home Price
Expectations Survey surveyed 114 housing market experts and
economists between April 27 and May 9,
2022. The survey was conducted by Pulsenomics LLC on behalf
of Zillow Inc. The Zillow Home Price Expectations Survey and any
related materials are available through Zillow and Pulsenomics.
About Zillow Group
Zillow Group, Inc.
(NASDAQ: Z and ZG) is reimagining real estate to make it easier to
unlock life's next chapter. As the most visited real estate website
in the United States, Zillow® and
its affiliates offer customers an on-demand experience for selling,
buying, renting or financing with transparency and ease.
Zillow Group's affiliates and subsidiaries include Zillow®,
Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing
Services™, Trulia®, Out East®, ShowingTime®, Bridge Interactive®,
dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an
Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).
About Pulsenomics
Pulsenomics LLC
(www.pulsenomics.com) is an independent research firm that
specializes in data analytics, opinion research, 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, The
Housing Confidence Index, and The Transaction Sentiment Index.
Pulsenomics®, The Housing Confidence Index™, The Transaction
Sentiment Index™, and The Housing Confidence Survey™ are trademarks
of Pulsenomics LLC.
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SOURCE Zillow