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Wednesday, 22 January 2020
Agent Resource Center
Agent Resource Center

Real Estate Market Predictions for 2020

Written by Jaymi Naciri Posted On Wednesday, 25 December 2019 05:00

If it’s the end of the year, it must be time for the soothsayers to come out. When it comes to predictions for the real estate market, well, there are a lot of them. We’ve taken the temperature of the experts to get a feel for what we can expect in 2020. 

Grain of salt warning: There was widespread agreement in 2018 about rising mortgage rates in 2019, that, initially proved true. But, ultimately rates went down—and stayed there. Experts can make educated guesses based on a wide range of economic factors, but with an impeachment hearing in the Senate pending and what is likely going to be a bonkers presidential election, anything could happen. That being said, there are some predictions we feel pretty good about—and some you’ll definitely want to pay attention to if you’re planning to buy or sell a home in the new year.

Mortgage rates will stay low.

In fact, some experts think they’ll drop even further. “According to Odeta Kushi, deputy chief economist at title insurance and settlement services provider First American, there’s ‘emerging consensus that rates will remain low next year—likely somewhere between 3.7% and 3.9%,” said Forbes. “Forecasts from Freddie Mac and the Mortgage Bankers Association back this up, both predicting 2020 rates within this range. Fannie Mae actually predicts rates will clock in even lower, vacillating between 3.5% and 3.6% throughout the year.” 

Added MarketWatch: “The vast majority of housing economists project that mortgage rates will remain below 4% in 2020.”

Single-family home starts will rise.

According to Fannie Mae’s Economic and Strategic Research Group, new home starts will jump from a 1% increase in 2019 to 10% in 2020, and top 1 million new homes the following year. This represents a boost from earlier forecasts. 

“Strong reads on the economy have researchers at mortgage giant Fannie Mae revising their 2020 housing forecast much higher,” said CNBC. Fannie Mae’s Economic and Strategic Research Group predicts builders will expand production more than previously expected, due to a strong labor market and robust consumer spending. Low mortgage rates will also help.”

Millennials will continue to buy homes.

High prices and limited inventory continue to be a barrier to homeownership for many, but millennials have made their mark on the market after many years on the sidelines. In September 2019, millennials accounted for 46% of all mortgage originations—a 43% rise from a year ago. This group is expected to dominate the market again next year. Realtor.com expects millennials to make more than 50% of all home purchases in 2020.

Those millennials will be heading for the suburbs.

“As home prices skyrocket, cash-strapped Millennials are looking toward more affordable places to put down roots—namely smaller, suburban towns on the outskirts of major metros,” said Forbes. “The trend has led to an uptick in ‘Hipsturbia’ communities—live-work-play neighborhoods that blend the safety and affordability of the suburbs with the transit, walkability and 24-hour amenities of big cities. The Urban Land Institute recently named Histurbia as one of its top real estate trends to watch in 2020.”

Millennials and baby boomers will both buy new. 

Millennials and baby boomers alike are pushing new home sales, and the trend is expected to continue. Beyond the desire for something brand new and low-maintenance, a lack of inventory in the resale market is also a factor. “The shortage of existing homes for sale has pushed more potential buyers to the new-build market,” said CNBC. “Mortgage applications to purchase a newly built home were up 27% annually in November, according to the Mortgage Bankers Association. Homebuilder sentiment jumped to the highest level in 20 years in December, according to the National Association of Home Builders.”

Prices will keep on rising.

Home prices will continue heading up, but here the experts disagree about how much. Realtor.com predicts a 0.8% nationwide rise—and a decline in some neighborhoods, including Chicago, Dallas, Las Vegas, Miami, and San Francisco. CoreLogic sees home prices rising by 5.6% by next September—eclipsing this year’s 3.5% rise. 

Inventory will be tight.

Of course, this is nothing new. But data shows that today’s homeowners are staying in their homes longer—five years longer than in 2010, when the average was eight years. This is largely due to Baby Boomers opting to remain in their existing home instead of downsizing, thus creating a logjam in the market. Experts expect the housing shortage to last beyond 2020 unless new home construction can up its pace well beyond what is forecasted.

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