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Predictions About Recovery Timeline/What it Means in $ Terms

Posted on Tuesday, May 25, 2010

The Madison, New Jersey-based analytics firm MacroMarkets LLC, founded by Robert Shiller, real estate sage and father of the closely-watched Case-Shiller Home Price Index, polled the group of housing market experts and strategists from the likes of Alliance Bernstein, Columbia Business School, Deutsche Bank, Moody’s Analytics, and the GSEs.

Based on their responses, the onset of price recovery in U.S. single family real estate is widely expected by 2011.

Between 2010 and 2014, the panelists forecast a rise in home prices of more than 12 percent.

“The survey results are important because they represent a consensus view among experts with rich and diverse knowledge,” Shiller said. “In the May survey they see only the slightest hint of a downdraft in home prices this year, and after that a respectable uptrend in prices, well ahead of the likely inflation rate.”
But Shiller added, “However, there were a number of panelists more or less sanguine than average, some significantly so, and this reflects continuing volatility and risk in the U.S. housing market.”

The views of those questioned by MacroMarkets didn’t all align. Joe LaVorgna, the chief economist at Deutsche Bank, pegs home prices to rise 37 percent over the next four years.

At the low end of the scale, both Gary Shilling, president of A. Gary Shilling & Co., and Anthony Sanders, professor of real estate finance at George Mason University, expect prices to have fallen by 18 percent by the end of 2014.

“The expectations within this first survey were provided following the end of the homebuyer tax credit and of the Federal Reserve’s $1.25 trillion mortgage-backed securities purchase program,” Shiller said. “It will be interesting to see how panelist views evolve in future months.”

According to the Federal Reserve, the aggregate value of real estate owned by households at the end of 2009 was $16.6 trillion.

Terry Loebs, MacroMarkets managing director and co-developer of the survey, put that figure into perspective when he said, “This asset class is still larger than U.S.-listed stocks in aggregate market capitalization terms.”

Loebs said, “The scale of the U.S. housing market, coupled with the powerful wealth effects of prevailing home equity levels, warrant close attention to future home prices. For example, if the cumulative 12.4 percent improvement in aggregate national home value follows the path that this panel’s year-by-year averages are suggesting, consumer balance sheets will improve by $2.1 trillion in less than five years.”-DSNews

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