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Last week it was reported that home prices will show appreciation in 2012 and beyond. However, consumer price inflation is expected to rise faster. Assuming the Wall Street Journal survey forecast turns out to be reasonably accurate, recent homebuyers will finally enjoy some housing equity gains in the upcoming years. All the while, their monthly mortgage payment will be protected, despite CPI inflation, because more than 90 percent of recent homebuyers have chosen a 15 or 30-year fixed rate mortgage. For the people who bought during the bubble years, however, there is little comfort in how long it will take to recover the losses. There is no comfort for renters either, since the biggest component of CPI inflation comes from rent increases.
The survey also says that the U.S. economy will avoid recession and slowly gain speed such that the unemployment rate falls to 7.2% by the end of 2014. The U.S. economy was forecast to improve despite two-thirds of the economists indicating that Europe is going into a recession.
The results are based on a survey of 54 leading economists. The forecast I submitted to the survey is for 1.5 percent home price growth in 2012 with CPI inflation 2.8 percent.
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