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Are 2013 Forecasts Too Low?

Here is a great article by Mike Simonsen of Altos Research.


Why Forecasts for the 2013 Housing Market are Too Low

MARCH  2013


I’m in Washington DC to talk to the National Association of Business Economics on the state of the housing market. I ran into Lawrence Yun, the chief economist for the National Association of Realtors and he mentioned that he just raised his forecast for 2013 from 4% year over year to 7-8%. That’s pretty bullish. Yun, of course, takes a lot of flack for being an industry cheerleader rather than objective. So he should be bullish, right? I told him he’s still too low.

The logic is this: in 2012 US Housing Prices climbed between 5 and 12%, depending on which measure you choose.  The Case-Shiller Index climbed 6.8% year over year at the end of 2012. Here in 1Q 2013, all the leading indicators are stronger than they were a year ago. (For those of you just tuning in, this is the third in a series of “home prices are stronger than you think” posts from me this winter.)

Contact Altos if you want details on the our housing market data.

2012 (December) 2013 Forecast
Altos Research 7.9% 10%
CoreLogic 6.8% 6%
NAR 11.5% 8%
Clear Capital 4.9% 5%

Note that all these measures, except for Altos, focus on the closed transactions. They are, by definition, lagging. It makes sense that, in an accelerating market, the Altos number is going to hit it’s high several months before the others do.

The always-lucid Bill McBride at CalculatedRisk saw homes prices rise in 2012 but anticipates a slowdown in 2013, though he doesn’t say why.


US Home Prices 2012Composite Prices. Single Family Homes. Altos 20-city (national) composite. Data as of February 22, 2013. Source: Altos Research

If you observe that home prices rose at x% last year and that the conditions (low supply, high demand) that created that rise are stronger this year, it’s reasonable that your models should indicate stronger price appreciation this year. Don’t be surprised when 2013 turns out to be another roaring year for home prices.