2020 Real Estate Predictions
At the end of each year I review the essentials that made the current real estate market and then look ahead to predict what’s in store for the upcoming year. Below are my predictions for 2020 based on data that was available as of December 15, 2019.
2019 Summary:
Our national real estate market had a strong recovery from the recession over the last decade. Our country saw strong economic growth, low unemployment (which reached a 50-year low in September), and strong gross domestic product (GDP). This led to high demand for housing and strong house price growth for several years (more modest growth last year). Demand was also driven by interest rates which continued to be at historic lows allowing for more buyers with more buying power. However, buyers were hampered with lack of inventory caused by high demand, lack of new construction, and subsequent high price growth, choking affordability. In other words, high buyer demand was impeding more buyer demand.
Although inventory levels last year improved in some areas and with various types of housing product, lack of affordable housing and the type of housing buyers want are causing an unbalanced inventory situation. Some price points and types of housing are seeing extreme demand while other types and prices are lingering on the market.
What can we expect in 2020?:
1. Housing Inventory – One of the biggest issues our country has is the lack of affordable inventory of the type of housing that are in highest demand. One of the biggest themes in 2020 is what I am calling “The Haystack Crisis”– namely, continuing lack of inventory will frustrate buyers because they will be hard-pressed to find what they are looking for – the proverbial needle in the haystack. Inventory of some types of housing will be sufficient for the demand – such as the high-end market, larger homes, some rural and suburban areas. However, urban areas, smaller homes in sought-after areas, and affordable homes will experience high demand.
2. Housing Starts/New Construction – Our new construction shortage began accumulating in 2009 resulting in our country in 2019 being 3.24 million units short of where we should be. Our country now needs 1.62 million units per year to keep up with demand for new construction (not including the deficit), the increase in population, and replacement of old structures. Due to builders getting out of the business after the recession, increases in expenses due to lack of qualified tradespeople, rising prices on building supplies and land costs, increased build time and requirements due to water and environmental issues, and increased permitting time, I expect this situation will continue to worsen and may even result in a shortage of 3.98 million units by 2022.
3. Home Price Growth – Nationally the October year-over-year median sales price grew 6.2% to $270,900 according to the National Association of REALTORS®. This was the 92nd consecutive month of year-over-year gains. I predict that national median sales prices will continue to grow between 3.6%-5.3% in 2020.
4. Interest Rates – Over the last 200+ years, the average interest rate has been 5.18%. We have been spoiled by historically-low rates which is keeping the wheels of our real estate market nicely greased. Although the Federal Reserve raised rates in 2018, they trimmed them back in 2019, trying to boost slowing global growth. I expect they could actually reduce them again. According to Freddie Mac, the average mortgage rate for a 30-year fixed rate mortgage began the year at 4.51% and has been heading downward, bottoming out at 3.49% as of September 5, 2019. As of 12/12/19 it was 3.73%.
Let’s talk about it
Let’s talk about the market now specific to your neighborhood to determine whether or not this is the right time for you to buy, sell, and/or invest in real estate!
There are several issues that may affect the real estate market in unforeseen ways in 2020: Trade wars, political uncertainty, the national debt, the election, and even environmental issues may leave their mark on the housing market. That being said, I am excited to see what 2020 will bring!
For additional information and predictions on our local market, please call or text: (206) 550-1676 or send an email to jen@jensrealty.com.
I’m always here to help! Wishing everyone good health, peace, and prosperity in the new year.
Cheers! Jennifer Suemnicht - Jen's Realty - RE/MAX Metro Realty, Inc.
www.JensRealty.com / 206-550-1676 / jen@jensrealty.com
