U.S. home prices to rise at a strong pace on tight supply: Reuters poll

(Reuters) - U.S. home prices look poised to rise at a robust pace over the next few years, mainly because of a chronic shortage of houses and steady demand, a Reuters poll showed on Friday.

A worker works at the construction site of a new home in Carlsbad, California September 22, 2014. REUTERS/Mike Blake

Still, a slim majority of analysts in the poll taken May 16-25 said the Trump administration should pursue some form of housing market deregulation, although 60 percent were not convinced that Congress would pass such policies.

The lack of any strong consensus among analysts in this poll and the one three months ago stems from uncertainty about what kind of deregulation, if any, will be proposed.

The administration’s inability to push other promised legislation, like a healthcare overhaul, has also not helped matters.

But some respondents had strong words about any withdrawal of regulations put in place after the 2007-2008 housing market crash, which knocked property prices down by 40 percent in some areas and triggered a punishing global financial crisis.

“Coming out of a period where we had a real housing sector collapse and where prices seemed so out of line and now having surpassed that, any housing deregulation should be done very carefully,” said FAO Economics chief economist Robert Brusca.

Even without stimulus, U.S. home prices are likely to rise at almost double the current rate of underlying consumer prices and wages, according to the latest Reuters poll of around 40 property market analysts and economists.

After climbing 5.0 percent in each of the last two years, the S&P/Case Shiller composite index of home prices in 20 metropolitan areas is expected to gain another 5.6 percent this year and 4.2 percent next year.

This is the fifth straight quarterly Reuters poll in which analysts have bolstered their view of higher prices in 2017.

“Healthy demand and low inventory continue to place upward pressure on home valuations,” said Wells Fargo chief economist John Silvia. “Those trends look to remain in place in the near term and therefore continue to underpin solid, single-digit home price increases.”

The latest data showed the number of houses for sale had dropped for 23 straight months from year-earlier periods. This pushed the median price in April to its highest since June 2016 and marked the 62nd straight month of year-on-year gains.

Turnover has not alleviated much pressure, either. In April, homebuilding dropped, new home sales plunged, and even resales fell from a more than 10-year high.

Property analysts now forecast annualized existing home sales in each quarter this year to average less than the 5.70-million-unit pace hit in March, which was the highest since February 2007.

Before the housing market crash, existing home sales peaked above a 7-million-unit pace in 2005.

“With the (April) supply of existing homes for sale at its lowest level since 1982, home sales will be constrained even as a strong labor market and gradual loosening in credit conditions supports housing demand,” wrote Capital Economics property economist Matthew Pointon.

The average 30-year mortgage rate is now forecast at 4.25 percent this year and 4.60 percent in 2018, according to the latest poll. That is below expectations from just three months ago.

When asked to rate affordability of U.S. housing on a scale of 1 being the cheapest and 10 the most expensive, the median answer was 6. That is similar to what analysts rated British and Canadian property in separate polls. [GB/HOMES] [CA/HOMES]

Polling by Anu Bararia and Hari Kishan; Editing by Ross Finley and and Lisa Von Ahn