Home Prices Projected to Begin Rebound in 2011

By JAMES R. HAGERTY

U.S. home prices will begin a gradual recovery by next year, according to a survey of 92 economists and other housing analysts by MacroMarkets LLC.

Separately, the U.S. Census Bureau reported that single-family housing starts in April surged to a seasonally adjusted annual rate of 593,000, up 10.2% from March. Ivy Zelman, chief executive of research firm Zelman & Associates, said builders stepped up production ahead of the April 30 deadline for sales qualifying for a federal tax credit, but since then have cut back.

Some of the forecasters surveyed by MacroMarkets were far from the average. Joseph LaVorgna, an economist at Deutsche Bank, sees home prices rising 37% by the end of 2014. Both Anthony Sanders, a professor of real-estate finance at George Mason University, and Gary Shilling, president of A. Gary Shilling & Co., expect declines of about 18%.

Mr. Shilling, whose firm provides economic consulting and investment advice, said excess inventories, including those from looming foreclosures, will pull prices down. Mr. LaVorgna said a rapidly recovering job market should soak up most of that supply. He added that much of the excess supply is in remote or economically depressed regions and so isn't relevant to most potential buyers, who will instead bid up prices in more desirable areas.

MacroMarkets, based in Madison, N.J., was co-founded by Robert Shiller, an economist at Yale University who helped create the Case-Shiller indexes. MacroMarkets creates securities that let people bet on the direction of various types of assets, including residential real estate. The survey by MacroMarkets was the first of what it says will be a monthly series involving about 100 analysts.

Mr. Shiller, who didn't contribute a forecast for the survey, said in an interview that the average prediction of a 12% price rise over five years was "a plausible scenario." During the housing boom, Mr. Shiller drew attention for bearish house-price comments that were far gloomier than the consensus but eventually proved to be on the mark.

The Census Bureau also reported that single-family building permits in April fell 10.7% from a month earlier to a seasonally adjusted annual rate of 484,000. Ms. Zelman said builders have slowed down now that it is too late for buyers to get the federal tax credit.

Before ramping up construction again, she said, builders will await signs that demand "isn't falling off a cliff" after being temporarily buoyed by the tax credit.

Ms. Zelman forecast that single-family housing starts for all of this year will total 559,000. That would be up 26% from 445,000 in 2009, but still off 67% from the peak level of 1.72 million in 2005. Ms. Zelman expects demand to be constrained by high unemployment, tight credit and the large number of Americans unable to sell their current homes because they owe far more than the market value.