The 2019 housing market saw falling interest rates and a seller’s market. In strong real estate markets, we saw low inventory and the demand remain hot. Do 2020 real estate market statistics show the same trends?
With a volatile market and new buyers and sellers jumping into the game, we’ll see a whole new real estate landscape in 2020.
From baby boomers to millennials, we’ll go over the key players as well as some trending predictions to watch for in 2020.
Here’s everything you need to know about the state of the housing market this year.
More Millennial Buyers
In strong real estate markets, rentals are growing more expensive. With rentals becoming unaffordable, some millennials may be looking to buy this year.
It has been a popular belief that millennials don’t want to own homes. According to a recent study by Chase, 70% of millennials that were surveyed said they would actually like to become homeowners.
Study participants noted that they would cut back on shopping, spa treatments, and other entertainment to save more money to buy a house. This is different than the popularly held belief about this generation.
High Price Apartments Drive Out Renters
One of the major reasons why millennials haven’t bought homes in recent years is because there isn’t enough inventory. In cities such as Austin, Nashville, and Raleigh where the job markets have boomed, inventory is low and prices are high.
Because housing is so expensive in these regions, there aren’t a lot of affordable starter homes. Even millennials with high paying, stable jobs, have been struggling to find anything in their price range.
In strong real estate markets where it has been hard for first time home buyers, high earning millennials have needed somewhere to live. This led to a surge in luxury rentals in cities such as Portland, Atlanta, Phoenix, and Dallas.
The rental prices are starting to increase to a point where we’ll see millennials in 2020 looking to buy to avoid paying inflated rents.
This is the first time, rents have tipped so far that buying may be a more affordable option in expensive markets.
Baby Boomers Will Look To Sell
As baby boomers age, many will look to sell their larger homes for something smaller. Boomers hoping to downsize will send a flood of new inventory into the market over the next several years.
With an increase in life expectancy, people are living longer. Many older adults don’t want to keep up a huge house and a massive yard. Selling and downsizing means no lawn to mow, fewer stairs to climb, and less house to clean.
For people looking to buy, this finally means some more inventory in 2020 and beyond. These homes will likely also be more affordable than the homes currently on the market. Baby boomers have often lived in their homes for over 30 years and may not have updated them.
With lower-priced baby boomer homes becoming available, buyers might snag a deal. Updating yourself will save money. In hot real estate markets, these homes will likely go fast. If not to bargain-hunting home buyers then for sure to developers and home flippers.
Home Prices Won’t Dip But Growth May Slow
Many new buyers are hoping that home prices will drop some in the years to come. Based on the low supply, home prices aren’t likely to fall in 2020. Even in the hottest markets, prices will remain high. Although they will increase, you won’t see double-digit price jumps in 2020.
This is a good sign that the housing market is stabilizing and we won’t see a huge bubble burst. When home prices rise too fast and become inflated, you see a big dip and that isn’t good for anyone. Even in hot markets where prices are still climbing, they will do so at a slower growth rate than in years past.
With so many home buyers searching for affordable starter homes and the availability increasing, millennials will likely enter the market in the year to come.
New Construction On The Rise
Because there has been such a shortage of available homes to buy, new construction projects are seeing a surge. When the available homes all need a ton of work or there are barely any homes on the market long enough to see, potential buyers are left with fewer options.
CNBC reports a study by the National Association of Home Buyers showing that builder confidence is on the way up in 2020.
We can see this trend in the number of new home purchase mortgage applications last year as well. In 2019, the Mortgage Bankers Association reported that the number of new home purchase mortgage applications in 2019 increased by 27%.
This shows the biggest increase in new construction since the recession in 2007. Fannie Mae researchers have predicted that home builders will ramp up production in 2020 by 10%. In 2021, the momentum isn’t showing signs of slowing down. Their forecast predicts that more than one million single-family homes are likely to be built in 2021.
Gentrification has been happening all over the country for decades. In 2020 we’ll continue to see a surge in strong urban markets.
Wealthier people are buying up homes in urban cores. Buyers want to be closer to work, nice restaurants, and amenities. Home prices in these areas are going up. Some residents have been finding it hard to buy homes in the neighborhoods where they grew up.
While gentrification may push low-income residents out, it doesn’t have to happen this way. In cities such as Washington D.C. and Atlanta, for example, gentrification has benefited some long-time residents.
More wealth coming into neighborhoods means more money for infrastructure and schools. For long-time residents in previously low-income neighborhoods, those that stay will see less crime, nicer parks, and increased school funding.
Gentrification can be problematic when there aren’t enough affordable housing options for people of all income levels.
Let’s say you grew up in a neighborhood and hoped to buy a home near your parents when you started your own family. If you live in a neighborhood that has seen major price increases and gentrification, you might not be able to afford even a fixer-upper near your childhood home.
2020 is also an election year. Gentrification is always a hot topic of debate for different political platforms.
Will The Coronavirus Affect The Market Forecast?
You won’t be able to talk about 2020 without talking about the implications of the coronavirus. While the full aftermath has yet to be seen, the respiratory illness that was first found in Wuhan, China has become a global pandemic.
Whether or not it’s warranted, people and the stock market are showing a lot of distress over the possibility of contracting this virus. Naturally, people are frightened and a lot is still not known about the illness.
With any global crisis, there is bound to be turmoil in the stock market and the economy. Currently, the global spread of the virus has prompted businesses to close, tourism to decline, and consumer confidence to sway.
While the sales of hand sanitizer may be increasing rapidly, home prices so far are holding steady. As more becomes known about the disease and new cases start to lessen, the hope is that dips in the economy will slow.
So far, the virus hasn’t caused major changes in the real estate market, but you will see a major slowdown in foot traffic and home tours. Real estate agents are offering more 3D virtual tours to allow potential buyers to se homes without actually having to go inside. With the Center for Disease Control urging people to stay home if possible and the ease of touring homes virtually online, spring will probably see fewer people out touring homes.
Pandemic or not, spring and summer are when the majority of home sales happen. Thankfully, this is also when cold and flu season ends for most of the country as well. Hopefully, with proper containment, sanitation efforts, and warming temperatures, we’ll see the usual upswing in activity over the warmer months.
Real Estate Market Statistics In 2020
Overall, economists and housing professionals feel confident in saying that real estate market statistics in 2020 are strong and steady.
As more millennials are looking to buy and more baby boomers are hoping to sell, there will be a welcome influx of affordable homes for those looking to do a little work.
More fixer-uppers and a low inventory of available homes can also increase new construction.
High rental prices are also a good indicator of market projections. When rents become too inflated, young professionals may feel better about taking the plunge into the housing market.
All of these market predictions mean good things for the 2020 housing forecast.
If you’re ready to talk to a real estate professional about buying or selling your home in 2020, fill out the contact form here to find an agent.