Zillow published the findings from its 2015 Q2 Zillow Home Price Expectations Survey two weeks ago and the results were not much of a surprise to those who have followed the housing market over the past decade or so. The experts in the Zillow Survey believed that home values will increase over the next year and will continue to increase through 2019.
Below are the general findings:
- Experts predict home values will grow 19 percent cumulatively through 2019, with the median U.S. home value set to exceed $200,000 in April 2018.
- U.S. median home values are expected to surpass their bubble-era peak of $196,400 in October 2017.
- 64 percent of respondents said they expect mortgage credit access to ease over the next year.
Over the past three years, our private money / hard money borrower clients have seen huge increases in the value of their rental property portfolios. We have several clients who bought a bunch of properties at the bottom of the market in 2009 in places like Stockton or San Bernardino. Back then, they paid $65,000 for distressed short sales, selling at about 20% of their previous sale price of $300,000 from the 2006-2007 period.
Now these same homes are approaching $225,000 valuations and if the current trend holds up, as the Zillow survey predicts, these properties will be worth $300,000 in about two years, bringing their value back to the Housing Bubble 1.0 level.
I’m definitely happy for our clients who bought at the right time six years ago. They’ve leveraged these properties to buy more distressed homes at discounted prices, either flipping or adding to their rental portfolio. It’s working for them and I’m happy to be a part of their success in growing their business.
When it comes to how long this run-up in housing will last, I really don’t know what’s going to happen long-term to the housing markets of California, Oregon, and Washington – the states our company lends in. Prices are rising really fast and at some point in the future, new buyers may not be able to afford ever higher home prices. The threshold in home values will come someday but I’m not sure when that day will arrive. However, I am confident that it will definitely come and home prices will decline, maybe not as sharply as we saw in 2007-2009, but decline they will. Some people will get hurt while others will make out just fine because they weren’t overleveraged. We’d like to think that our clients are not overleveraged on their rental property portfolios, which are usually capped at 65% LTV.
I recommend that you read through the Zillow survey. It gives the impression that the housing market will be pretty healthy and stable through the end of the decade.