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46 EXPERTS UNDECIDED ON CAUSE OF AFFORDABILITY CONCERNS A survey from Zillow finds real estate and investment experts are divided on the likely culprits behind affordability concerns in the market. In a survey of 106 economists, real estate experts, and investment and market strategists, Zillow found a slight majority—28 percent— pinned the most blame for declining afford- ability on stagnant income growth across the country, even as the rest of the economy has moved in a generally positive direction. At the same time, the number of respon- dents pointing to "abnormally high rates of home price and rent appreciation" as the main problem was only slightly smaller at 27 percent. e third most commonly cited answer, following close with 21 percent of responses, was the "abnormally low supply of homes currently available for sale or rent" due to a lack of sellers coming into the market and low rates of new home construction. Still, given the host of issues hampering the housing market, "one could probably make the case that things could, and maybe should, be a lot worse," said Dr. Stan Humphries, chief economist for Zillow, noting that tight credit also presents a problem of its own. "We're certainly in a better spot than we were just a couple years ago, but the housing market remains far from anyone's definition of 'normal,'" Humphries said. "It will take years for these issues to either be adequately addressed through policy or to naturally work themselves out of the market." While affordability condi- tions are still generally favorable as a result of historically low mortgage rates, cost is becom- ing a more serious problem for homebuyers in a number of metros, including some of Califor- nia's largest markets, Zillow reported in a recent study. e survey also turned up concerns about price growth inflating a new bubble if it con- tinues at such a high pace. ose who say price spikes are the root behind affordability problems were most likely to express worries of a bubble, with 90 percent saying there is moderate to high risk—if one isn't already inflating. On average, panelists in the survey fore- cast nationwide home value appreciation of 4.4 percent through the end of 2014, nearly a point above the historic average of 3.6 percent. Growth next year is expected to fall to 3.8 per- cent, dropping again in 2016 to 3.4 percent. Predictions ranged from a low of 3.2 percent this year to a high of 5.8 percent. "After narrowing over the past year, in this quarter, the spread between the forecasts of the most optimistic and pessimistic groups not only expanded but widened by a degree we have not seen in the four-year history of this survey," said Terry Loebs, founder of Pulsenomics, which conducts the quarterly survey for Zillow. "Time will tell whether Washington's unfolding plan to expand mortgage credit will have a durable, positive impact on home values, housing confi- dence, and market expectations." DEFAULT RATES DECLINE IN APRIL TO LOWEST POST- RECESSION RATE Data through April showed a decline in the national default rate from March, accord- ing to S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices. e indices are a compre- hensive measure of changes in consumer credit defaults, released monthly. e national composite default rate recorded its lowest post-recession figure of 1.11 percent in April. e month's number was the lowest default rate since June 2006. Default rates for first mortgages continued their downward slide, settling at 1.01 percent in April. e first mortgage default rate in April was the seventh consecutive month of decline and was the lowest level seen since July 2006. However, the second mortgage default rate saw an increase, which posted at 0.63 percent for April. "e prospect for further gains in eco- nomic activity and consumer confidence is good as shown by the continuing decline in consumer credit default rates," said David M. Blitzer, managing director and chair- man of the Index Committee for S&P Dow Jones Indices. "Consumer default rates have stabilized at levels similar to those seen before the financial crisis." Blitzer continued, "e national composite is nearing a historic low while the auto loan reached a historic low in April. Neither the one-month uptick in consumer price inflation nor the Federal Reserve's winding down of its bond buying threaten either consumer default rates or overall economic activity." All five cities (New York, Chicago, Dal- las, Los Angeles, Miami) measured by the S&P/Experian saw default rate decreases for the second consecutive month. New York experienced the largest month-over-month downturn, dropping 18 basis points below March's default rate. All five cities posted default rates below the previous year's rate. Every state except for New York and the District of Columbia posted a year-over-year double digit decline in foreclosures, according to CoreLogic. KNOW THIS

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