Economists Forecast Moderating Price Gains

As home price increases keep showing signs of slowing down, economists expect gains to continue moderating through the next two years, according to a poll conducted by Reuters.

In a survey of 31 economists, Reuters arrived at a median forecast of price growth of 7.5 percent this year, down significantly from the 13.4 percent improvement recorded in the S&P/Case-Shiller 20-city index last December.

Price growth is expected to slow further from there, dropping to 4.0 percent by 2016.

The survey also found that, despite concerns from some analysts of overheating as price gains far outpace the historical average, the median judgment of economists surveyed is that the housing market is situated right in the middle between extremely overvalued and extremely undervalued.

Meanwhile, even as price increases start to come down, analysts don't expect any major pickup in housing activity as lending standards, slow job growth, and stagnant wages prevent more potential homeowners from entering the market.

According to Reuters, existing-home sales are forecast to reach an annualized rate of 4.75 million this quarter, continuing to march upward to a rate of 5.10 million by the first quarter of 2015.

Existing-home sales achieved a rate of 4.65 million in April, according to the National Association of Realtors, a modest improvement following a slow start earlier this year.