The industry may not see a buyer’s market until at least 2020, according to a majority of real estate economists surveyed by Zillow and Pulsenomics LLC.
In the real estate technology company’s latest “2018 Q3 Zillow Home Price Expectations Survey,” more than 75 percent of approximately 100 economists surveyed predicted the market won’t favor buyers until 2020 at the earliest.
“For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market,” said Aaron Terrazas, Zillow’s senior economist. “Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger.”
“Inventory is still falling on an annual basis, and home values are growing well above their historic pace,” Terrazas added. “Although these trends are starting to lose their edge, it is far too soon to call it a buyer’s market.”
Home value appreciation has been faster in 2018 than in 2017, according to Zillow’s data. Inventory has also dropped on a year-over-year basis for 42 consecutive months – signs that the market is firmly in favor of sellers.
Home growth is slowing in more than half of the nation’s 35 largest metros, with price cuts becoming more common. Even in markets where appreciation has slowed, prices remain high and sellers continue to have the upper hand, according to Zillow. Home values are also expected to rise an additional 5.9 percent in 2018, according to the data.
While more than 75 percent of respondents believe a buyer’s market won’t emerge until 2020 at the earliest, 43 percent of respondents believe the market will shift towards buyers in 2020. Regionally, economists believe the Midwest will start to favor buyers before other regions.
“While ongoing supply constraints are reinforcing the floor on home prices right now, the experts’ forecasts still imply the joists will start to crack sometime next year, and result in sub-three percent annual home-value appreciation in 2020 and beyond,” said Terry Loebs, the founder of Pulsenomics LLC, the research and economists firm that conducted the Zillow sponsored the survey.
“For the first time, a majority of the experts said that there is downside risk to their long-term outlook for home values nationally – and they outnumber experts who assigned upside risk to their forecasts by more than a three-to-one ratio,” Loebs added.