Garnet Capital Advisors Blog

A recent poll sponsored by real estate website Zillow has predicted that home prices will rise more than 4 percent in 2014.

Market experts predict rising home values
The Zillow Home Price Expectations Survey culled responses from more than 100 market experts, asking them to estimate where the U.S. Zillow Home Value Index would go between now and the end of 2018.

The market strategists, economists and real estate experts that participated forecast that through the end of this year, home values will rise at an average of 4.4 percent across the nation, leaving them with a Zillow Home Value Index of $176,380. The most optimistic group of respondents - the 25 percent providing the most robust home price predictions through 2018 - projected that in 2014, these U.S. property values would gain 5.8 percent.

Respondents cite various factors driving prices
When asked why people are growing increasingly concerned about housing affordability, the respondents cited various factors. A low inventory of homes, which market participants have complained about repeatedly, was singled out by 21 percent of participants.

The problem of scarce housing availability was also noted in the April Zillow Real Estate Market Reports. According to these documents, for-sale inventory declined during the first four months of this year. In April, this measure of homes listed for sale was 0.4 percent lower than the same time in 2013.

The Zillow survey noted several other factors that are helping to constrain affordability, including:

• Lackluster income growth, which was cited by 28 percent of respondents
• Sharp inflation in both rent and home prices, identified by 27 percent
• Stringent lending conditions, mentioned by 11 percent
• A very low number of properties available for sale or rent, listed by 21 percent
• An insufficient housing stock, identified by 13 percent

Zillow chief economist Dr. Stan Humphries commented on the situation in a statement released along with the real estate website's April Zillow Real Estate Market Reports.

"First time home buyers are ready to buy, but unfortunately, aren't able to take advantage of the spring shopping season and low mortgage rates because of the lack of homes for-sale in their price range," he said. "This shortage of inventory is driven by a couple factors, most notably by stubbornly high negative equity, particularly at the lower end of the market, which is preventing many sellers from listing their homes."

Potential impact on loan origination
If these various factors stifle sales, then this development could undermine loan originations. More than one-quarter of participants in the Zillow Home Price Expectations Survey cited rising home prices as a factor deterring people from buying real estate.

However, potential buyers might see the appreciation and feel more confident about getting involved. This situation could potentially spur property sales, and therefore loan origination.