JPMorgan Sees Home Prices Up 14% as Bank of America Touts Party

Bank of America has again revised up its home price forecast to 8 percent for 2013, up from 4.7 percent.

This is after a 7.3 percent rise in 2012.

In a new report titled "Someone say House Party?", Bank of America's Chris Flanagan, Michelle Meyer, and Justin Borst write that "a positive feedback loop has begun". Basically, when people think home prices are rising, they think they will keep doing so and credit conditions will improve, and this in increases demand for homes.

Tight housing supply and affordability are likely to stoke demand and push home prices higher.

JPMorgan Chase more than doubled its forecast for U.S. home price gains in 2013 to 7 percent this week, and predicts a more than 14 percent increase through 2015.

And there's proof of this. Fannie Mae's latest survey shows that 48 percent of respondents believe that home prices will rise over the next 12 months, only 10 percent forecast a fall.

"It is a powerful positive relationship especially in this environment of historically low interest rates and a Federal Reserve determined to keep policy accommodative."

Tight housing supply and affordability are likely to stoke demand and push home prices higher. What's more, the declining inventory isn't being driven by demand like it was during the housing boom, but by declining supply.

Source: “JPMorgan Sees Home Prices Up 14% as BofA Touts Party,”
Bloomberg News (March 15, 2013)