(Reuters) - Despite expectations of Federal Reserve interest rate hikes, U.S. home prices are likely to rise 5 percent this year, followed by nearly as solid gains in 2017, a Reuters poll found.
The Fed hiked interest rates for the first time in a decade in December but the housing market remained robust, with home resales reaching a six-month high in January.
In 2015, home prices also gained 5 percent, despite widespread expectations of a Fed interest rate rise, according to the S&P/Case Shiller composite index of prices in 20 metropolitan areas.
For 2016, the S&P/Case Shiller index was seen rising 5.0 percent, according to the median expectation in a poll of 24 analysts. That compared with the 4.0 percent forecast in December’s poll.
Nine of the 14 common contributors between the two polls upgraded their forecasts, two left them unchanged while the rest downgraded.
In 2017, home prices will rise 4.0 percent, followed by 3.5 percent in 2018, the poll suggested.
“The housing recovery is quite sustainable in the U.S. and should continue at a moderate rate through this year and next,” said Sal Guatieri, a senior economist at BMO Capital Markets.
“We just don’t see interest rates rising meaningfully to slow the markets that much. Mortgage rates are likely to remain low in even if the Fed raises interest rates slowly,” he added.
Guatieri expects the Fed to raise rates by 50 basis points this year.
Some analysts cited the possibility of a U.S. economic slowdown affecting the course of U.S. home prices
“I am getting more concerned about the economy. If the economy turns lower, the housing market is going to turn lower. Housing is not in such great shape that it’s going to continue to push ahead,” said Robert Brusca at FAO Economics.
Brusca said there was a growing and palpable risk of a recession and a slowdown in the jobs market was the last piece needed to complete the picture for a weakening economy.
There is currently a one-in-five chance of a U.S. recession in the next 12 months, according to a separate Reuters poll. That probability has steadily increased over the last two months.
One possible prod for prices is the comparative afford ability of homes, the average cost of which crashed around 30 percent in the aftermath of the financial crisis and have still not completely recovered.
When asked to rate average house prices on a scale of one to 10 - extremely cheap to extremely expensive - the median answer was 5, indicating prices are just about right.
Thirty-year U.S. mortgage rates, currently around 3.65 percent, are also seen as unlikely to be a hindrance in the near future.
Respondents said they need to rise to around 6.0 percent before starting to seriously restrain housing activity. The poll showed 30-year mortgage rates will average 4.0 percent this year, 4.4 percent next, and 5.0 percent in 2018.
“Any rise in (mortgage) rates will be accompanied by an acceleration in earnings growth, so mortgage payments as a share of income will remain historically low.” said Matthew Point, a property economist with Capital Economics.
Analysts also expect sales on existing homes to continue at a fairly steady pace of 5.36 million units in the first quarter of this year and 5.40 million units in the second quarter.
While that is far from the all-time high of 7.2 million units sold just before the financial crisis, it would signal over six successive quarters of sales above 5.0 million units.
Polling and analysis by Sujith Pai Editing by W Simon