Despite property market growth, it seems the US is suffering a crisis of confidence. The March 2012 Zillow Home Price Expectations Survey revealed that economists are tempering their expectations of a recovery in the near term. Of the 104 experts asked about their predictions for the National Home Price Index over the next five years, the majority claimed prices would rise but at a slow rate.
It is expected that property values will be muted in 2013, with an annual rise of 1.39 per cent, compared to 1.75 per cent noted previously. This follows a sharp downturn in home prices in the final quarter of 2012, which created doubt in the property investment market about the strength of the sector. With values falling, many economists sought to revise their predictions for 2013, dropping their forecast of price growth from 1.8 per cent to 1.4 per cent.
This is a sharp contrast to the optimism experienced towards the end of last year and suggests that analysts may have jumped the gun in predicting that recovery was just around the corner. In November 2012, the Global Property Guide reported that after four years of price drops the US was on the verge of salvation, with house prices rising, demand returning and construction activity picking up pace.
Delinquency rates were also stabilising, while foreclosure numbers started to drop. During the year to August 2012, the seasonally-adjusted purchase-only house price index increased by 4.75 per cent (3.01 per cent in real terms). According to the Federal Housing Finance Agency, this was the largest annual growth in house prices since September 2006 and was met with much jubilation. Growth equated to a 1.48 per cent (1.23 per cent in real terms) rise on a quarterly basis. Only time will tell if this was merely a flash in the pan for the US housing market, but the sector will be praying for a return to growth.
Coverage on the dangers of UK housing market optimism here