Home prices to rise 15% in the next 3 years?

Economist for NAR sees prices going up 5% a year, but other analysts are less optimistic. Some of the increase is likely to be inflation, no matter who's counting.

By Teresa at MSN Real Estate Nov 13, 2012 6:44AM

© JupiterimagesNot only is the housing recovery well under way, but the median home value also will rise 15% in the next three years, or at least that’s the view of the National Association of Realtors’ chief economist.

 

"Existing-home sales, new-home sales and housing starts are all recording notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home-price measures are showing sustained increases," Lawrence Yun told attendees at the 2012 Realtors Conference and Expo in Orlando, Fla.

 

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"Real estate will be a hedge against inflation, with values rising 15% cumulatively over the next three years, also meaning there will be fewer upside-down homeowners."

 

He predicts sales of existing homes will rise 9% this year, to 4.64 million, an additional 8.7% next year, to 5.05 million, and to a total of 5.3 million in 2014. He expects sales of 368,000 new homes this year and 575,000 next year.

One reason for the rising prices is the falling inventory, which is fueling demand for new construction, perhaps beyond what builders can produce.

 

"Unless building activity returns to normal levels in the next couple years, housing shortages could cause home prices to accelerate, and the movement of home prices will be closely tied to the level of housing starts," Yun said.

By 2014, the percentage of sales that are distressed homes should fall from the current 25% to about 8%, Yun predicted.

 

That doesn’t mean the foreclosure crisis is over, said Mark Vitner, managing director and senior economist at Wells Fargo, who also spoke at the conference. "Distressed homes right now are like an after-Christmas sale,’’ he said. “Most of the best stuff has been picked over, but make no mistake they'll be with us for a while."

Not all analysts are as optimistic as Yun, though the predictions are closer than they look if inflation picks up.

 

Bank of America Merrill Lynch analysts predict average appreciation of 3.3% a year over the next 10 years.

Forbes contributor Bill Conerly, a senior fellow at the National Center for Policy Analysis, points out that the current price appreciation is being driven by a decline in supply and underbuilding in recent years. He writes:

Home prices will rise in 2013, but only modestly. The most recent data suggest that national average housing prices are rising by roughly a 5% percent annual rate. That’s too optimistic a projection for the next few years, however, because there are many owners of multiple underwater properties who will sell as soon as they don’t have to lay out cash. That increased number of houses on the market will limit price hikes.

Business cycles aside, there is not much reason for housing prices to appreciate by more than 3% plus inflation, or about 5% percent in this current environment.
 
27Comments
Nov 24, 2012 8:40PM
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Lets see obamacare sucking 4.8 percent from the sale of a house. Increase in capitol gains on the sale with no rollerover. My healthcare becoming taxable income. Foods goingtogo through the roof.....40 percent down from here..wait until the rates rise....FHA unwriting all mortgages.

 

Obama has put the final nail in the economy.....unless your an illegal alien..

 

Nov 24, 2012 6:58PM
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Home values are slowly going up in parts of Kansas.
Nov 24, 2012 4:17PM
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Who would have guessed? The scam resets, the fix is in, those who control the pricing, begin again. Isn't it time you bought a house? Watching the local market, seems they've already dumped twenty five percent on the price of a house. Who will be next to be cheated?

 

Peace

Nov 24, 2012 3:49PM
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Value's going up? They should be because my real estate taxes , income taxes and cost of living are sure going up......Buckle up, because the Gov't will do what it does when it can't spend itself into prosperity.......de-value the dollar and then you inflation....THE WORST TAX
Nov 24, 2012 3:46PM
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Twinkies will layoff 185,000. My current employer will layoff at least 500. There will be more to follow. We shouldn't talk too positive within 4 years.
Nov 24, 2012 1:10PM
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The housing market will come back when the economy comes back and jobs are available. Oh heck, what's four more years for the market to return.
Nov 24, 2012 1:05PM
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Even if there is a increase in home sells it will be put back rest quickly if prices rise. People are still not willing to go in to debt for a big house payment yes. 
Nov 24, 2012 12:04PM
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Nevada home prices are down and NOT moving back up.  It really sucks to live in Nevada now.
Nov 24, 2012 10:38AM
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Consider the source ppl. He is the president of the Realtors Association. Its all a speel to keep the market going. That simple. Think about it. I used to be an agent for 23 years. Now I advise many brokers on business development. The market varies from location to location. Yes some areas still have not hit bottom. Others are rebounding. Pretty simple math. supply and demand. The bottom lin is where are the jobs? Need income to pay for it.
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Where is my comment from ten minutes ago?? Neildonnely@hotmail.com aka Nuclear Neil
Nov 24, 2012 9:04AM
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How is everybody going to PAY for those homes, when there are no JOBS???? Good luck with that.....lol

Nov 24, 2012 8:35AM
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Housing prices have already bottomed in both markets.  You missed the boat spring of 2012.
Nov 24, 2012 7:07AM
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People are still borrowing gobs of money for rapidly depreciating houses. Prices are still falling and in fact the declines are accelerating.
Nov 24, 2012 6:54AM
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Really? Home prices here in North Central Ky. have bottomed out. The local paper list about 25 to 30 usually going up for the auction block due to bankruptcy. Does not sound good to me.
Nov 24, 2012 6:54AM
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Realtor here that flips/deals with foreclosures. Prices up, inventory down here in MN. But, nothing has been done to correct what happened, and it will happen again. Can't feel sorry for the people that refied their mortgages several times, and then just let them go belly up.....after living in them for over a year free. They essentially just got their money up front, took the money and ran their neighbors equity down when they realized they had finally maxed them out. Most of them are filthy pig stys with years of neglect. What, they can't afford soap and water?  Some of the early foreclosed upon people have already bought again, and are now losing their second house. Are you kidding me? Do feel sorry for the few that lost a job long term or had an illness - but they seem to be the minority in this mess. Same with short sales - just a joke on the people that have worked and payed their mortgage.
Nov 24, 2012 4:14AM
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Where do they get these numbers from? The real-estate market is still in decline. I have been in the market for a home for over a year now. From my personal experience I have seen prices on the decline. (The main reason I have not made a move). This is one of the most bogus pieces of reporting I have seen. I have personally wittiness homes on the market for months with numerous price reductions and still not selling. The market is still in a correction phase and that is reality. Anyone who drinks this cool-aid deserves to get burned. Do yourself a favor before a purchase. Does your home work. Find the mean price for the neighborhood. You will find in many cases the price of the house is over priced for the home values in that area.  In most cases the house on the market is over priced because of the owners over inflated mortgage.  They made the mistake for taking on an overinflated mortgage. This is their blunder, and not yours. Do not fall victim on a price to cover the cost of their overstated mortgage. I am going to wait until I see the market bottom out, and only when I see a slight price increase that is sustained for a few months. Then I will probably make a purchase.  This article is not factual it is poor reporting with no research to back it up. I see no interviews with home buyers or sellers. Just some false numbers.

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