SEATTLE, Feb. 20, 2018 /PRNewswire/ -- New changes to U.S. tax laws led 41 percent of survey respondents to lower their long-term expectations for the U.S. housing market, according to the 2018 Q1 Zillow® Home Price Expectations Surveyi.
The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 housing experts and economists about their expectations for home price growth, and whether tax reform affected these predictions.
When asked how the new tax law impacted their five-year forecast for home values in the U.S., 41 percent of respondents said their overall housing outlook is now more pessimistic, while 31 percent of the panelists had a more optimistic view as a result of the tax reform. The remaining 28 percent of respondents said that tax reform did not change their outlook.
The Tax Cuts and Jobs Act, enacted in December 2017, limited many itemized deductions such as the mortgage interest deduction while expanding the standard deduction. Most taxpayers take the standard deduction, and will see take-home incomes increase as a result of tax reform, providing a boost to spending, savings and investment this year.
One possible reason for the experts' pessimism is the fear that cutting taxes when the American economy is already running at full capacity increases the risk of a downturn in the next five years. This could push the Federal Reserve to increase interest rates faster than had been expected, according to Zillow Senior Economist Aaron Terrazas.
"By expanding the standard deduction, tax reform will put more money into the typical American's pocket in 2018, which will boost spending and could help renters save faster for a down payment," said Zillow Senior Economist Aaron Terrazas. "But the longer-term outlook is less rosy. There is some concern that tax cuts at this point in the business cycle may be throwing fuel on an already ranging fire and could lead the economy to overheat. Most economists we surveyed see a stronger outlook for the housing market over the next year or two but a more pessimistic outlook on the longer horizon."
In the near future, experts raised their predictions from previous surveys for home values as limited inventory and high demand keep prices moving higher.
Despite the rosy outlook for home prices over the next few years, homes today are less valuable than they would be if the recession had not happened. If the housing bubble and bust had not happened, and home values had instead appreciated at a steady paceii, the median home value would be about $214,500, 4 percent higher than its current value of $206,300.
"The persistent short supply of entry-level homes for sale has highlighted just how bifurcated the U.S. housing market has become," said Terry Loebs, founder of Pulsenomics. "The experts project that the value of homes in the bottom third of the market will appreciate at 6 percent this year—double the rate expected for the highest-priced tertile. Limited inventory of low-priced homes, coupled with expectations for rising interest rates, likely foreshadow a frenetic, anxiety-filled spring buying season for qualified first-time homebuyers."
Zillow
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
Pulsenomics:
Pulsenomics LLC (www.pulsenomics.com) is an independent research and consulting firm that specializes in data analytics, 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, and The U.S. Housing Confidence Index. Pulsenomics®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.
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| i This edition of the Zillow Home Price Expectations Survey surveyed 105 experts between January 29, 2018 and February 12, 2018. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. and asked the experts about their expectations for the housing market. |
| ii Assuming a 3.6 percent annual pace, the average pace from 1987-1999. |
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SOURCE Zillow
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