Survey: Home Values Expected to Slow Down in 2014

According to the Zillow Home Price Expectations Survey, home values should end the year up by 6.7 percent year-over-year. That's the good news. But over 100 panelists said watch out for five years of slower growth to start in the New Year.

Photo by: Coldwell Banker Residential Brokerage A potential slowdown in home values? Don't tell Chicago developers who've staked out downtown and are building it up as the new mecca for urbanites. Here, a view from the penthouse of Trump Tower Chicago, the tallest residential skyscraper in the western hemisphere.

Chicago, like the rest of the country, has been riding a rebounding, upward trend on home values, a long-awaited respite from a brooding market that evaporated equity and value after the scary 2008 bust. Take a look at the July 2013 S&P/Case-Shiller Home Price Indices, which reported 12.4 percent gains across its 20-city composite for the last 12 months, with Chicago increasing by 7.8 percent. Today, the median sale price in Chicago is $268,600, a far cry from the post-bubble woes that stuck prices in the basement.

But the recent Zillow Home Price Expectations Survey, published Nov. 7, claims the next leg of the real estate recovery may clamp down that exuberance -- for at least the coming five years. It's a cooling phase. A retraction, some analysts would reason. And one expected after the soaring appreciation, says Zillow Chief Economist Dr. Stan Humphries. “Rising mortgage rates, diminished investor demand and slowly rising inventory will all contribute to the slowdown of appreciation,” he said.

Sponsored by real estate market and data provider Zillow and conducted by Pulsenomics LLC, the quarterly survey asked 108 economists, market experts and investment pros to crunch the numbers and trends. And, not surprisingly, there was divergence. Optimists projected home values would rise 12.5 percent by 2018, beating the 2007 national top side of $230,000. Pessimists weren't buying it and suggested values would probably average around 6.2 percent below 2007's high watermark. 

When forecasters read the future, expect a ripple effect in discussions, in products and in services attached to real estate. If this slowdown takes us for a ride, how will it impact mortgage rates, available inventory and prices on single-family homes here? What about the Chicago condo rollout? Leading developers have the banks talking, commissioned the plans and have multiple buildings slated to come online, all over town, for the next several years.

Hard to tell from this side of 2014 whether this is a trend in the making, but worth keeping watch.  

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