Zillow on Housing in 2013: “Up, Up and Away”

Zillow has posted a research piece citing 5 things consumers can expect from housing this year.  Among them, a very bullish stance on prices:

Up, Up and Away

  • The national housing market hit bottom in October 2011, and home values have since risen 5.3 percent from that trough. The most recent Zillow Home Value Forecast calls for 2.5 percent appreciation nationwide from November 2012 to November 2013.
  • According to a recent Zillow survey of more than 100 economists and analysts, respondents predicted home values (based on the S&P/Case-Shiller U.S. National Home Price Index) to rise 3.1 percent in 2013, on average.
  • Most markets covered by Zillow’s Real Estate Market Reports have already bottomed out, with only 10 of 255 covered metro areas not projected to hit a bottom within the next year.

Bottom Line: Homeowners looking to sell in 2013 can largely rest assured they won’t be selling at the bottom,and many will find themselves in a sellers’ market. Potential buyers in 2013 may be more motivated to get a deal done while affordability is still extremely high and mortgage rates continue to be historically low.

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. the months of supply for both new houses and existing houses is now under 6 months which usually leads to a rise in prices. since housing starts are still at the lowest level in decades the trend should continue for the foreseeable future.

  2. I rarely agree with zillow but here’s the exception. This feels like a new bubble in the making. While rates may not go lower, lending criteria has a lot of easing to come and each time criteria eases prices will march higher allowing for more easing still. Eventually it pops but that could be 4 years from now….. and it could take the stock market with it…. just like the last bubble.

  3. JD, Schilings argument appears weak to me. Shadow inventory is down 10% per the Core Logic stat in your article, and anecdotally I’ve heard several stories of big time investors buying homes in bulk from the banks. Prices are WAY up in some of the hardest hit areas like Phoenix and Miami so any inventory the banks still have they’ll be only too happy to unload it now…. and there are more buyers/offers for every propery in these areas so they are desperate for more inventory. His other argument is low housing formation…. but the longer it stays low, the sooner it will rise. And there are plenty of reasons it will rise 1) jobs are coming back, and will pick up even more if housing does take off again, 2) lots of people are living with roomates and parents which is where a lot of the low household formation #s come from, 3) as credit criteria eases ever more buyers will hit the market, ) rents are crazy high, and thanks to sub 4% interest rates buying affordability is incredibly low.

    For the record I think this is nuts….. we should be stimulating the economy in some other way, and I think this will end badly just as it did the first time, but right now all signs point to less and less friction to housing sales and prices.

  4. Agree with Hangemhi. Shilling’s point is hard to prove.

    According to LSP (http://www.calculatedriskblog.com/2012/12/lps-mortgage-delinquencies-increased-in.html), Shadow Inventory (which include delinquent but not yet foreclosed, which may have a chance to revert?) is 5.5 million units. Not a small number. If all foreclosed and put into the market, it will add about 10 month of supply.

    However the foreclosure process is slow. If demand outweighs the release of the foreclosure, housing price may hold and rise slightly.

    Curious what Cullen thinks of this.

  5. aint buying the up up and away stuff, but i’m glad i bought a foreclosure near the bottom.

  6. 1. Zillow is talking its book.
    2. More and more people are becoming bullish on housing. This is a VERY good sign that we’re approaching (or perhaps are even past) the peak of the stockmarket(s).
    3. I agree with Shilling. No housing recovery any time soon.

  7. Agree with Mr. Market, they are a public company and need to talk up the business. Please, go buy a house on Zillow’s advice. If you need a second opinion to make you feel better, ask Lawrence Yun. But don’t come crying back here in 12 months when your “Up, Up, and Away” investment is worth less than your purchase price, mainly because the trickle from the stuffed-up foreclosure pipeline (with another five years of product on the books) is still eroding comparables.

  8. About 2 years ago, I was getting hammered here by some of the high profile real estate bears for my bullish stance on Phoenix real estate. I argued that one had to look at the fundamentals of each local market and to not “just focus on the national market.” I can still remember my comments being called dangerous, foolish, uninformed, wrong, misleading etc….Since then I have booked profit on multiple properties.

  9. There has been a significant housing recovery already so I’m confused by your “not anytime soon” comment. The question is whether it will continue. A stock market crash would likely be followed by a new bull run and housing already low would suffer a blip followed by a run. Then maybe 4 years later we get a new correction. A few months ago I would have not said this but now it seems obvious that low interest rates, high rents, and easing credit criteria is re-inflating the bubble.

  10. Your post perfectly frames the problem. For those who are flipping properties, the market appears functional and thus healthy. But the housing market cannot exist on sales from one low bidder to another, nor can it exist on sales to corporations buying rental stock. The housing market needs masses of real buyers — those in the $200K to sub-jumbo levels — to buy homes. Unfortunately for the housing bulls, these folks are not wading into the market because they know what lies on bank balance sheets. How? They look down their streets and see every tenth (or fifth, or third) house with high grass, circulars stuffed in the door, and a bank shoirt sale sign on the lawn. Even with an unprecedented federal stimulas to housing, and the lowest mortgage rates in history, they aren’t budging. Until they do, the housing recovery is a mirage.

  11. Great point. I can see clearly there are multiple houses available and a lot of houses are in renting in my commnity. The market is up for speculators, but not for the real demand.

  12. I also agree with Mr. Market(I agree with inDC as well). Dead cat bounce at best. Banks are takin over a year to foreclose, I see homes that have gone to trustee sale for 4 years in a row now. Jobs are not recovering, at least not the kind of job it takes to buy a home. Bill at calculated risk has shown himself to be a shill for the fed and banks. I rarley visit his site anymore for that reason. They are attempting to talk the market higher.

  13. “look down their streets…”

    I look down the streets in my neighborhood and see virtually zero inventory, multiple bids on homes that sell within days of listing and have even received unsolicited offers to buy my current home. I am not suggesting that I believe in the “Up up and away” projection but per Solomon I agree RE is local. Where does housing go from here? Who knows? That said, I am taking the plunge and putting my money on the line as we buy a new primary residence. Feel free to point and laugh as I can’t say for sure I won’t lose my shirt!

  14. “Zero inventory, multiple bids on homes that sell within days of listing and have even received unsolicited offers to buy my current home”

    I am guessing you live in the Washington, DC, area, If so, congrats, you live in the alternate universe I inhabit in which the recession never occurred b/c taxpayer dollars have kept flowing like water to overpaid gov’t employees and contractors.

    If you aren’t in the DC area, I would seriously question the “zero” figure. If you live in NY State, foreclosures were legally halted by the Attorney General around 2-3 years ago. While these are FINALLY being processed, the overall impression from a layman’s perspective over the last few years was inventories were tight and the market was healthy. If you live in a hard-hit area such as Miami or Phoenix, I might be more inclined to buy some sort of recovery — except for the fact that you must have at least 20% cash to buy a house, and a lot of agents aren’t even entertaining financed bids AT ALL. The “recovery” is being driven by, as I stated before, the fringes (speculators, corporations) with cash and a plan. When these folks stop buying, the wheels will come off the housing market “recovery.”

  15. “I am guessing you live in the Washington, DC, area, If so, congrats, you live in the alternate universe …”

    Partially right – yes, I live in an alternate universe, but it is located in southern CA – this aint the real world here either. But my description of the RE market in my local area is quite accurate – I have been on the hunt for a new property for 9 months and I speak from a position of firt hand knowledge. That certainly does not mean prices will continue to climb or that a tidal wave of inventory wont hit the market – but as of now there is virtually no inventory, homes sell within days of listing, prices have climbed around 10-17% within the last year and it is beginning to feel very bubbly…

  16. “Dead cat bounce” was also used to describe the markets of some of my investments back then. Today, if you look at the fundamentals, correlations, and technicals of some markets, you can still find some bargains…..