Where’s the housing market headed in 2020? Let’s take a look at four key components the experts are predicting. What can historical precedent combined with today’s data tell us about the future of real estate?
Here’s what the experts predict for 2020.
# 1 – millennials will drive the market.
Millennials are expected to account for more than half of all mortgages this year. Outnumbering Gen X and Baby Boomers combined. It’s not surprising, considering their age and stage of life. In 2020 the largest cohort of millennials will turn 30 and the oldest millennials will turn 39. Millennials are going to be active in the housing market, not only because they’re at the age that they’re thinking about becoming first time home buyers, but they’re also in the age range when they’re marrying and having kids. Younger millennials originally flocked to urban centers, but high prices and lack of square footage and subpar schools are driving them to outlying cities as they begin to marry and expand their families.
#2 – mortgage rates will remain low.
Mortgage rates have declined more than a full percentage point since November 2018, when they hit a peak of 4.94%. The Mortgage Bankers Association predicts that rates will remain low at around 3.7% through mid-2021. This may not seem significant, but on a mid-range home in our marketplace, that could mean a difference between $400 and $500 on a monthly mortgage payment. These lower mortgage rates make homeownership more accessible and more affordable for buyers. Although economists expect mortgage rates to stay low, they do caution against waiting to act. Economic factors, shifts in supply and demand, or unforeseen impacts of the November election could cause rates to rise unexpectedly. It’s a good idea to lock in these low rates now.
#3 – home prices will keep rising.
Economists predict housing prices will continue to rise, whether there’s a recession or not. In fact, property data firm CoreLogic forecasts a faster rate of growth in home prices higher in 2020 then we saw in 2019 with the biggest gain at the lower end of the market. Chief economist, Ralph de Franco, expects entry-level home prices to increase faster than incomes this year, making it even more difficult for many first time buyers to afford to enter the market. This is due to the fact that builders have tended to focus on more expensive higher profit houses and less on replenishing low inventory level, entry-level homes.
What does it mean for you? If you have the ability and desire to buy a home now, don’t let a fear of a recession or the hopes of falling home prices hold you in limbo. Economists expect home values as well as rent prices to continue rising so you’ll likely pay more the longer you wait. Considering today’s low-interest rates, even a higher-priced home becomes more affordable. And finally, inventory constraints will continue.
Americans are staying in their homes longer than in the past. In 2019 the average US homeowner had resided in their home for 13 years, up from just eight years in 2010. That means there are fewer homes available today for those who want to buy. Locally, It is not uncommon to find homeowners who stay in their homes for 30 years or more. It’s possible that an increase in new construction can offer some relief. However, the efforts we’re seeing are not expected to be enough to meet the demand. Economists are predicting that during 2020 inventory growth will continue to struggle and could actually reach a historic low level.
If you’re planning to buy a starter home, start your search now before the spring and summer rush and be prepared to compete for the best listings. Have everything in order before you begin. Get in touch with a professional realtor from the beginning who can guide you through the whole process. If you’re considering selling your home, there are plenty of buyers looking for homes, giving you an edge in negotiations and the potential to sell for top dollar. Just make sure you hire an agent with pricing, marketing, and negotiation skills.
National real estate numbers can provide a big picture outlook but real estate is local. A local market expert can guide you through the ins and outs of our market and the issues most likely to impact sales and home values in your particular neighborhood. If you’re considering buying or selling a home in 2020, working with a local professional will help you to develop an action plan to meet your real estate goals this year.