Great (and Quite Variable) Expectations

“I have been bent and broken, but – I hope – into a better shape.”

– Charles Dickens, from Great Expectations

The U.S. Housing Confidence Survey (HCS) includes several questions regarding expectations for future home values within the local market where each head of household respondent resides. We ask the questions and carefully monitor the response data over time, because the $24 trillion U.S. housing market has recently been bent and broken, and these expectations impact the confidence and future behavior of market stakeholders.

The depth of HCS data enables analysis of home value expectations by time horizon, metropolitan area, and population segment. The following table reveals the degree to which both short-term and long-term expectations vary by population cohort.

Home Value Change Expectations, By Cohort and Time Horizon

The home value expectations data collected from residents of individual metro areas are generally consistent with patterns evident within the above table, e.g.:

  • Homeowners tend to have higher home value expectations than renters.
  • Recent home buyers and first-time buyers are typically the most optimistic population cohorts concerning future home values.
  • Underwater homeowners are less optimistic about the rate of future home value appreciation (in both the near term and over the long run) than above-water homeowners.
  • Among the generation cohorts, millennials and seniors tend to be the most and least optimistic, respectively, about future home value appreciation (in the near term as well as over the long run). In every city except Los Angeles and St. Louis, households headed by millennials were are optimistic about 2015 home value appreciation than the overall metro area population.
  • Despite the general patterns described above, the relative strength of expectations for both near- and long-term future home value changes for any population segment can vary considerably within and across metro areas.

The data in the following table illustrate the last point. For example, both millennials and seniors in St. Louis expect that home values will increase an average of about one percent in 2015, while members of these age groups who reside in San Jose expect home value appreciation of 6.4 percent and 3.8 percent, respectively.

Rankings of Home Value Change Expectations for 2015
All Households, Millennials and Seniors Cohorts