[Read A Bit Blog] Real Estate Forecast for 2020
We’re in the midst of the longest economic expansion in U.S. history, and a recent survey found that experts believe the economy will remain positive throughout 2020.1 Still, given that recessions are a natural (and necessary) part of a business cycle, we know this period of growth will eventually end.
Many Americans assume a recession would lead to a decline in home values. But ATTOM Data Solutions analyzed real estate prices during the last five recessions and found that, in the majority of cases, home prices actually went up. Only twice (in 1990 and 2008) did prices decline, and in 1990 it was by less than one percent.2
So what can historical precedent—combined with today’s data—tell us about the future of real estate? Here’s where experts predict the housing market is headed in 2020 and beyond.
HOME PRICES WILL KEEP RISING
Economists predict U.S. housing prices will continue to rise, regardless of a recession. In fact, CoreLogic forecasts a faster rate of growth for home prices in 2020 than we saw in 2019, with the biggest gains at the lower end of the market.3 “Low interest rates and a shortage of starter homes will continue to push up prices,” explains Arch MI Chief Economist Ralph DeFranco. “This is especially the case for lower price points, since builders have tended to focus on more expensive, higher-profit houses and less on replenishing low inventories of entry-level homes.”4
What does it mean for you?
If you have the ability and desire to buy a home now, don’t let a fear of recession or falling 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.
INVENTORY CONSTRAINTS WILL CONTINUE
Americans are moving less often. In 2019, the average homeowner had resided in their home for 13 years, up from just eight years in 2010. That means there are fewer homes on the market for those who want to buy.5 It’s possible that an increase in new construction could offer some relief. This year, the National Association of Realtors expects single-family housing starts to reach their highest level since 2007.6 However, it probably won’t be enough to meet current demand. “In 2020, we expect inventory to struggle to grow and could instead reach a historic low level,” writes Realtor.com Senior Economist George Ratiu.7
What does it mean for you?
If you’re planning to buy a starter home, start your search early, and be prepared to compete for the best listings. We can help you assess your options, including those in new construction.
MORTGAGE RATES ARE EXPECTED TO REMAIN LOW
Low mortgage rates make home ownership more affordable. Fortunately, the Mortgage Bankers Association expects rates to remain low, at around 3.7%, through mid-2021.8 However, some experts caution that unforeseen factors could cause rates to rise unexpectedly. “We recommend borrowers with long-term plans of staying in their homes to lock in a low rate now because there’s no telling how long these low rates will last,” warns Preetam Purohit, a capital markets trader at Embrace Home Loans.9
What does it mean for you?
If you’re looking to buy a home, act soon to lock in a historically low mortgage rate. It will minimize your monthly payment and could save you a bundle over the long term. And if you plan to stay in your current home for a while, consider whether it makes sense to refinance your mortgage at today’s lower rates.
Locally, statistics show that the number of homes on the market in Stearns, Benton, and Sherburne Counties since 2014 have been decreasing. Because of this shortage, we are in a “sellers” market. Homes that meet buyers’ expectations in their price range do not stay on the market very long. Additionally, the median sale price of a home has continually increased over the past five years.
MILLENNIALS WILL DRIVE THE MARKET
Millennials are expected to account for more than half of all mortgages in 2020. In past years they flocked to city centers, but high prices and lack of space are driving them out to the suburbs as they begin to marry and have children. In response, a new model for suburban living has emerged. “Hipsturbias,” or mixed-use communities that bring the live/work/play concept to the suburbs, were recently named one of the top real estate trends for 2020 by the Urban Land Institute.4
What does it mean for you?
If you’re a millennial looking for more space and better schools, we can help you identify the best local communities to meet your needs. And if you’re a homeowner with plans to sell, give us a call. We know how to market your home to millennial buyers.
Sources. NBC News 2. Curbed 3. HousingWire 4. Forbes 5. Redfin 6. HousingWire 7. Realtor.com 8. MBA Mortgage Market Forecast November 2019 9. Dallas Morning News
WE’RE HERE TO GUIDE YOU
While national real estate predictions can provide a “big picture” outlook, real estate is local. If you’re considering buying or selling a home, contact us to schedule a free consultation. We can guide you through the issues most likely to impact sales in our area, and we can help develop a plan to meet your real estate goals this year.
START PREPARING TODAY
If you plan to BUY this year:
1.Get pre-approved for a mortgage. If you plan to finance part of your home purchase, getting pre-approved for a mortgage will give you a jump-start on the paperwork and provide an advantage over other buyers in a competitive market. The added bonus: you will find out how much you can afford to borrow and budget accordingly.
2.Create your wish list. How many bedrooms and bathrooms do you need? How far are you willing to commute to work? What’s most important to you in a home? We can set up a customized search that meets your criteria to help you find the perfect home for you.
3.Come to our office. The buying process can be tricky. We’d love to guide you through it. We can help you find a home that fits your needs and budget, all at no cost to you. Give us a call to schedule an appointment today!
If you plan to SELL this year:
1.Call us for a FREE Comparative Market Analysis. A CMA not only gives you the current market value of your home, it will also show how your home compares to others in the area. This will help us determine which repairs and upgrades may be required to get top dollar for your property, and it will help us price your home correctly once you’re ready to list.
2.Prep your home for the market. Most buyers want a home they can move into right away, without having to make extensive repairs and upgrades. We can help you determine which ones are worth the time and expense to deliver maximum results.
3.Start decluttering. Help your buyers see themselves in your home by packing up personal items and things you don’t use regularly and storing them in an attic or storage locker. This will make your home appear larger, make it easier to stage … and get you one step closer to moving when the time comes!
New Century Real Estate is an energetic team that helps you fully understand the process of purchasing and/or selling a home. Be sure to ask us about savings available for local Hometown Heroes who buy or sell a home with a New Century Real Estate Agent.
