Home appreciation rates are expected to increase this year, but then slow during the next five years, the Zillow Home Price Expectations Survey reveals.

At the end of 2013, U.S. home values are expected to be up an average of 6.7 percent year-over-year prior to an anticipated slow down in the upcoming five years, according to the quarterly survey, which was conducted by Pulsenomics and included responses from 108 economists, real estate experts and investment and market strategists.

By 2018, annual appreciation is projected to be 3.4 percent, having dropped from 4.3 percent in 2014.

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However, the respondents predict that overall U.S. home values could surpass their height of May 2007 by the first quarter of 2018, based on the recent home value appreciation outlook, and could potentially exceed the $200,000 as 2018 comes to a close.

"The housing market has seen a period of unsustainable, breakneck appreciation, and some cooling off is both welcome and expected," Zillow Chief Economist Stan Humphries states. "Rising mortgage rates, diminished investor demand and slowly rising inventory will all contribute to the slowdown of appreciation."

The most optimistic quartile of respondents forecast an annual increase in home values this year of 8.3 percent, while the most pessimistic quartile expects a much lower increase of 5.6 percent. While expectations held by the optimistic group dropped from 9.3 percent in the prior survey, the pessimists' anticipations rose from 5.1 percent.

The panelists with the most optimistic predictions anticipate that by the end of 2018 home values would be up 12.5 percent over the 2007 ceiling, on average. On the other hand, the most pessimistic group expects home values to remain around 6.2 percent below the 2007 ceiling.

The survey also shows that a majority of the respondents are in favor of the government's involvement in conforming the mortgage market. Specifically, 58.4 percent said the government's involvement should be "somewhat significant," "significant" or "very significant," while only 8 percent conveyed that the federal government should have a "non-existent" role in the conforming market.

In addition, the respondents believe approximately 35 percent of new mortgage loans should be backed by the government, nearly the same level of government backing reported at the peak of the housing bubble in 2006.

"Currently, the federal government backs roughly 90 percent of all new mortgage originations in the U.S. in some form," said Pulsenomics Founder Terry Loebs in a statement. 

"In 2000, prior to the bubble, the government backed about 50 percent of new mortgages. These benchmarks and survey data are another reminder of the challenges that lie ahead in reforming U.S. housing institutions."

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