The more than decade-old bull market still has room to run in what U.S. economists are beginning to predict as a near-term economic future that, until recently, would have been considered inconceivable, but the bottom line is that we are continuing to grow, and should see another year of positive numbers. In a recent survey by the National Association for Business Economics experts believe the U.S. economy will remain positive throughout 2020.
Last year threats and thoughts of the “R” word creeped into conversations and metaled with our decisions. This year we will likely pay more for the purchases we did not commit to. Economists predict U.S. housing prices will continue to rise, even if we find ourselves slipping into a cyclic recession. In fact, property data firm 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.
Just as we are seeing at the local level, the national supply of housing is significantly low. According to mortgage insurer, Arch MI, Chief Economist, Ralph DeFranco 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. “Low interest rates and a shortage of starter homes will continue to push up prices,” predicts DeFranco.
New construction across the nation will increase significantly this year. The National Association of Realtors (NAR) expects single-family housing starts to total one million this year, the highest level since 2007. And NAR Chief Economist Lawrence Yun predicts the average price of new construction will decline slightly as builders shift to building smaller, more affordable homes.
This increase in supply should offer some relief to the unbalanced inventory nationally, but on our local scene, new home construction is very low, with mostly apartment construction filling the void for housing needs.
The Mortgage Bankers Association predicts rates will remain low, at around 3.7%, through mid-2021. Mortgage rates have declined more than a full percentage point since November 2018, when they hit a recent peak of 4.94%. On a $640,000 30-year fixed-rate mortgage, that lower rate means buyers could save around $466 on their monthly payment and more than $167,760 over the life of their mortgage. Low mortgage rates are a significant factor for home ownership affordability.
While economists expect mortgage rates to stay low, we are cautious of other economic factors that can impact those rates. Election results, international politics, Wall Street, and overall supply and demand can create a quick shift in rates.
Millennials Will Drive The Market
Millennials are expected to account for more than half of all mortgages this year, outnumbering Generation X and Baby Boomers combined. It’s not surprising, considering their age and stage of life. In 2020, the largest group of millennials will turn 30, and the oldest millennials will turn 39. Our local demographic completely mirrors this statistic. Buying preferences of the millennial generation will continue to escalate values near public transportation, urban mixed use areas, and properties that are of newer construction, or recently remodeled.
Recently, 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.
Making It Real
While national real estate numbers can provide a “big picture” outlook, real estate is a local subject. As local market experts, we can offer more insight to 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, now is a good time to start discussions and come up with a plan. Contact us now to get the process going and set yourself up for smart choices for your real estate investment.