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Housing Recovery: Long, Slow Road To Normal Ahead

Real estate consultant Jonathan Miller calls it all “happy housing” — reports and commentary that, in his opinion, overemphasize the positive.

Forecasts see U.S. home price gains of at least a couple percentage points this year, given early signs pointing to a housing recovery. But there’s rising debate among real estate analysts on whether some recovery calls are getting overheated.

Miller, president of influential New York-based real estate appraisal and consulting firm Miller Samuel, is especially skeptical of rosy forecasts based on recently rising prices. He cautions that the housing recovery could move sideways or down for the next couple of years as foreclosures move through the system and tough underwriting persists.

“That is not being factored into happy housing news,” Miller said.

The National Association of Realtors forecasts U.S. existing-home sales to rise about 9% this year and the median price to lift 5%, on the heels of a 9.5% year-over-year price jump in August. A rise in the median, or midpoint, can reflect either appreciation or a change in the mix of sales toward higher-priced properties and away from foreclosures.

Everyone’s Got An Opinion

A recent poll by real estate website Zillow (Z) found consensus expectations for a 2.3% U.S. home price rise in 2012. But views among the 113 economists and other real estate strategists it surveyed ran a gamut — from depreciation of 2.5% to appreciation of 9.2%. Just a quarter ago, those polled expected on average a 0.4% drop for the year.

In a big rise from the flat 2012 view two quarters back, the Urban Land Institute’s September survey of 39 real estate economists and analysts came up with consensus expectations of a 3.2% rise in average home prices this year, followed by 3.9% in 2013 and 5% in 2014.

What could mar that scenario? Though foreclosures have fallen, Miller sees plenty of “unfinished business” with foreclosures ahead. It could cause U.S. home prices to weaken at times over the next year or two, as bank-owned homes typically sell at a 30% discount and drag on the prices of nearby homes.

Also, tougher mortgage underwriting is keeping plenty of would-be buyers from sealing deals, even as interest rates keep falling.

“If you can’t get a mortgage, how does that help you?” Miller said.

Homebuyers’ overinflated views about where home prices would go helped fan the housing bubble. And it could take a long time to achieve those valuations again.

Read More At IBD: http://news.investors.com/business-inside-real-estate/100412-628177-real-estate-recovery-

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