(Reuters) - U.S. house prices are forecast to rise at more than double the current rate of underlying consumer prices and wages over the next few years, underpinned by steady and solid turnover in the housing market, a Reuters poll showed.
While housing affordability is getting worse for first-time buyers, most analysts and economists polled by Reuters say that rents are even more prohibitive, which should prompt more young people who can manage to do so to buy their first homes.So while few expect a major boost to economic growth from the housing market, it is currently on a strong enough footing to withstand the Federal Reserve's plans to gradually raise interest rates, which will also increase mortgage costs.After rising 5.0 percent in 2015, the S&P/Case Shiller composite index of prices in 20 metropolitan areas is expected to gain another 5.5 percent this year, and 4.2 percent next year, according to the median forecast of 20 analysts.The highest forecast polled was for an 8 percent rise this year, while the weakest was for no growth at all in 2018. No analyst predicted outright house price falls on a calendar year basis over the next three years.Comments from analysts suggest that while conditions will generally improve, there will be some, particularly young people burdened with historically high levels of student debt, and who as a result may never be able to buy their own home."The more relevant factor for first-time buyers has been the sluggish, tepid pace of economic recovery and its impact on job and wage growth," noted Robert Denk, senior economist at the National Association of Home Builders."The pace of job growth has improved over the course of the recovery but wage growth is still weak, inhibiting first-time buyers' ability to accumulate a down payment."Asked to rate affordability of U.S. housing on a scale of 1 being the cheapest and 10 the most unaffordable, the median answer was 6. But asked the same question on average rents, the median rating was 7, slightly more unaffordable.Slightly more than half of the respondents who answered an extra question said that affordability for first-time buyers has become a "serious" problem.STEADY TURNOVERFor now, a relatively fitful U.S. recovery despite a historically low unemployment rate suggests that the housing market is not yet on the cusp of rapid acceleration.Housing market analysts do not appear moved by an April surge in pending and new home sales. New U.S. single-family home sales recorded their biggest gain in nearly a quarter century in April, touching a more than eight-year high.Property analysts are forecasting a steady 5.4 million unit annualized pace of existing home sales over the coming year, about where it was in April, far below its peak above 7 million in 2005, before the housing market crash and financial crisis.The most optimistic view was for an average 6.08 million unit annualized pace in the first three months of 2017.Affordability, as ever, remains an obstacle to buyers and builders of new homes."First-time homebuyers prefer to bypass starter homes and purchase places with greater duration. But the slow recovery in construction has kept upward pressure on prices and rents," wrote Lisa Berlin at BofAML.Buck Horne at Raymond James agreed."Weak wage growth is not keeping pace with rent and home price increases. Rising land and labor costs are making it more difficult to build entry-level product in locations people are willing to live," he wrote.Still, the share of first-time buyers crept up to 32 percent in April from 30 percent both in March and a year ago, according to data from the National Association of Realtors.Investors also appear to have a fair amount of confidence in the future performance of the housing market. The Standard and Poor's homebuilding sub-index <.splrchome> has risen more than 11 percent in the last three months.Shares of the three largest U.S. homebuilders -- D.R. Horton Inc