Today we’re publishing our first look at the 2015 housing market. Based on real-time observations of housing supply and demand, among other conclusions, we’re forecasting a 7% home price increase for 2015.
Bearish Headlines, Bullish Reality
It’s scary to be a contrarian particularly if you’re contrarian AND bullish. In retrospect this position is the most fun. If you’re right.
From the report:In terms of home prices, the US real estate hit the absolute bottom on January 4, 2011. Home prices are 39% higher since then. Yet every day we see media headlines declaring “weakness” and “disappointment.” As recently as June 2015 housing, apparently, remains a chief concern for Fed chief Janet Yellen, who uses phrases like “much slower pace than expected” and “slowdown.” In our view, these attitudes reflect a myopic view of actual market conditions and conflate concerns over the mortgage industry, the otherwise-constrained new construction market, and more broadly, the long-term financial stability of the US consumer with specific current housing market supply and demand dynamics. While these are valid long run concerns, the variables impacting home prices have proven to be driven by low available supply and growing household formation. The real-time data paints a much more robust environment than the headlines would indicate. Demand remains high, transactions happen very quickly. Home prices are up another 9% year over year as of July, 2014. We’ve had a strong run and the American consumer is anxious to again buy real estate.
The report goes into depth on a number of leading indicator metrics, here’s one that captures the essence. This is year over year price changes for the US real estate market. You can see that we’ll end the year up about 8-9% from the end of 2013. That boost alone will help 2015 march to a reasonable appreciation rate.
More commentary coming soon.
The report is available for download here