A Five-Year Housing Forecast

Abstract

Even to attempt to make a long-term forecast seems like a useless and idiotic exercise. In the climate we live in today, we are not smart enough to see beyond a couple of days, or at most, a few weeks. Still, it has to be done, not just to fill the pages of magazines, but for planning purposes. So we look at possible scenarios under various assumptions. Housing, as we all know, is highly credit sensitive. Thus our assumptions are heavily weighted toward future developments in the financial markets. What we are actually saying is that if interest rates decline, more people will be willing—and able—to buy homes. If interest rates do not decline, people will not buy. There are three ways of looking at things: the optimistic, the pessimistic, and the most likely forecasts. All three will be mentioned in this article.