Wondering what’s in store for the housing market in 2020? You’re not alone. Buyers, sellers, brokers—we all want to look into a crystal ball to help guide our real estate decisions for the next year. Should our clients buy, sell, or stay put? Many of the industry’s largest research organizations have already weighed in with their 2020 predictions to help us answer those questions. Here’s what they are saying:
1) Most experts are predicting a continued rise in housing prices. Where these experts differ is in exactly how large the increase will be. The most optimistic estimate comes from property data company Core Logic, which draws its data from more than 7,000 ZIP codes across the country. Core Logic is predicting an increase of 5.6% nationwide in home prices for the year from September 2019 to September 2020. The online selling platform Zillow predicts a much more modest 2.8% increase while Freddie Mac predicts 2.9% increase in home sales. Meanwhile, Lawrence Yun, chief economist for the National Association of Realtors, announced at NAR’s 2020 Forecast Summit that it was taking a middle of the road view between these two, predicting a rise of 3.8% in home prices next year.
The takeaway? We don’t know how much housing prices will continue to rise but they will continue to rise in 2020. (Read more here.)
2) When it comes to 30 year fixed-rate mortgage rates, experts are unanimous: they will remain more or less where they are right now, which is about 3.75%? Just over a year ago, mortgage rates nearly hit 5%, levels that hadn’t been seen since the early part of this decade, according to HousingWire.com. But as we get ready to move into a new decade, mortgage rates are back at 3.75%. That drop led to a surge in both new purchases and refinancing’s, according to Aly J. Yale, writing in forbes.com. Count on their remaining there through 2020 and possibly even into 2021. Also, writes Yale, “…there’s ‘emerging consensus’ that rates will remain low next year—likely somewhere between 3.7% and 3.9%.”
These historically low interest rates might be expected to cause a hot buyer’s market, but that isn’t expected to happen. Why not?
There’s a shortage of housing to buy. There are several trends converging to create a tight housing supply, which in turn puts a lid on buying. The first is that the typical length of homeownership has increased. According to recent data from Redfin, the average homeowner is staying in their home 13 years—up from just eight years in 2010. In some cities, homeownership tenures are as high as 23 years.
The second factor holding down supply is that Baby Boomers are not moving out of their homes. Unlike past cohorts of retirees, who typically downsize or move to senior housing when they hit their 60s, today’s seniors are staying put in the large homes where they raised their families. A recent study from Freddie Mac shows that if today’s older adults—those born between 1931 and 1959—behaved like earlier generations, an additional 1.6 million homes would have hit the market by the end of the last year. Since they did not, it’s been much tougher for the next generation to purchase their “family” residences.
What does this all mean for the housing market over the long term? Will the Boomers continue to remain in place as they age into their 70s and 80s? Or will they move, belatedly, into more conventional senior housing arrangements, finally freeing up housing for the succeeding generation? We simply don’t know. But we DO know that whatever they do, it will affect the housing market profoundly. We’ll keep our crystal ball handy.
Want to have a conversation about buying or selling in 2020? Happy to! Contact me now or in the new year. And may your 2019 end on a high note and your 2020 be your best year ever.
Want to see how last year’s predictions panned out? Click here to read my article on how to sell your how fast in the new year.