Economist Sees a 3% Rise in Home Values — by 2013

Mortgage & Real Estate

After dropping 1.5% in 2011, home prices should be flat next year and finally gain traction in 2013, according to Macroeconomic Advisers chairman Joel Prakken.

Speaking at the National Association of Home Builders’ Annual Construction Forecast conference this week, Prakken predicted that values should rise by 3% in 2013.

He noted that all the major house price indexes suggest that values have  bottomed out. 

“This is a very positive sign because you simply will not get a robust turnaround in housing demand and residential construction if buyers and builders expect house prices to decline,” Prakken noted.  

Macroeconomic Advisers’ forecast calls for slow (2.5%) economic growth in 2012, but with little to no improvement in the jobs market. 

Total single-family and multifamily starts should cross the 1 million unit mark by the end of 2012 and move up to 1.2 million starts in 2013 as economic growth finally gathers steam. (During the first nine months of the year builders broke ground on 460,000 units.)  

But Prakken cautioned about risks to his forecast, including a relapse of declining values which would hurt construction activity. 

The co-founder of Macroeconomic Advisers also pointed out that the European debt crisis poses a major risk to the U.S. economy. “Housing is the biggest drag on the U.S. economy right now — but Europe is the biggest risk,” he said.

Daily Briefing | Friday, October 28, 2011

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