It’s a new year, and the real estate market is about to ramp up for another busy season. But what are the real estate market predictions for 2020? Is now the time to buy a home, sell a home, or sit and wait? We’re breaking down five real estate market predictions for 2020 that might surprise you.
Real Estate Market Predictions for 2020
1. Mortgage Rates Will Stay Low
Less than a year ago, economists warned of an impending housing crisis. But since then, interest rates have dropped. Now, many buyers can expect sub-4% mortgage rates, making homeownership attainable for more people.
The National Association of Realtors predicts mortgage rates will hold throughout 2020 and 2021. With a steady GDP growth rate and low unemployment, NAR expert economists say there is little chance the federal reserve will increase interest rates. This is excellent news for homebuyers, particularly those interested in buying their first house.
2. A Recession is Unlikely
Last year, more than half of the nation’s leading economists believed the U.S. was headed for a recession. However, as the economy continues to grow, experts now think a recession is unlikely in 2020.
That’s good news for real estate market predictions, too. A low probability of recession means more potential home buyers report that 2020 will be the year they purchase a house.
While a recession is less likely than this time last year, there are still a few hurdles to clear before we can breathe a collective sigh of relief. Looming trade negotiations, tensions with foreign nations, and an upcoming presidential election will all play a role in the economy’s health. Even considering those hiccups, a recession seems unlikely this year.
3. Housing Prices Will Continue Gaining
Interest rates remain low, employment rates are up, and the economy is booming. Real estate market predictions indicate that many more Americans will be buying instead of renting in 2020. But demand continues to outpace supply. Therefore, even though salaries remain stagnant, housing prices continue to climb.
That’s great news for home sellers, but those looking to buy will feel the sting of sticker shock this year. The NAR projects a 3.6% increase in house prices this year, and a forecasted 3.5% in 2021.
With such a favorable outlook, real estate promises to remain a profitable investment.
4. Builders Will Keep on Building
We’ve already established that a recession is unlikely, interest rates will remain low, and housing prices will increase for the next two years. On that note, 2020 is looking like the ideal time to purchase a home.
However, with the demand for homes far outpacing the supply of existing properties, home builders remain hard at work. The need for new homes isn’t slowing down.
Builder confidence in the market means new home starts will be markedly up in 2020, according to the Census Bureau. New build permits have seen an increase for the last six months of 2019. Fannie Mae has even changed its annual outlook for new builds, now estimating new starts will be up 10% over last year, with 1 million new homes on the market by 2021.
This abundance of new homes isn’t just good news for the home builders. More homes on the market mean supply is finally starting to catch up with demand. Therefore, buyers can expect to see falling prices for new homes in the coming months.
5. Supply Remains Low
While new builds are making great strides in 2020, it’s still not enough to offset the housing shortage in many American cities. An influx of young professionals to the market, paired with Boomers who are staying in their homes longer, means there are simply more buyers than there are houses to purchase.
In particular, the low supply affects starter homes the most. Young families are ready to buy their first homes, but competition is stiff for the entry price points. Larger, more expensive homes sit on the market longer, while younger first-time homebuyers fight for the few affordable homes available.
Of course, steady interest rates and low unemployment only confound this problem. Many Americans who weren’t able to purchase a home before are now in a stable economic position. Lower interest rates allow homebuyers to rely more on financing. And high job growth means Americans have more money to purchase a home.
But heading into 2020, buyers can still expect affordable housing options to be few and far between. The housing supply shortage will likely last many years to come.
The Bottom Line: Real Estate Market Predictions Are Positive!
The bottom line: experts agree that 2020 will likely be a good year for home buyers, sellers, and builders. The real estate market predictions seem to indicate that a strong economy and positive job growth mean homeownership is now in reach for millions of Americans who didn’t think it possible in years past.