Now that 2019 has officially come to an end, we take a look at what’s ahead for 2020. Our predictions are based on market research, professional insight, and nearly ten years of experience in the industry. Read ahead for an insider’s look at the biggest trends in real estate coming this year.
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, an increase from the modest growth seen in the year prior. Demand was also driven by interest rates, which remained at a historically low rate, allowing for more buyers with more buying power to enter the market. However, buyers were also hampered with lack of inventory caused by high demand, lack of new construction, and subsequent high price growth, choking affordability. In other words — buyer demand was already too high for this growth to continue.
Although inventory levels improved last year in some areas across various types of housing product, lack of affordable housing and a limited inventory of in-demand home styles are both causing an unbalanced inventory situation. To put it simply, 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?:
- Housing Inventory – One of the biggest issues our country has is the lack of affordable inventory of the types of housing that are in highest demand. One of the biggest themes in 2020 is what some are calling “The Haystack Crisis”– namely, a continuing lack of inventory that will frustrate buyers because they are continually 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, and some rural and suburban areas. In contrast, urban areas, smaller homes in sought-after areas, and affordable homes will experience high demand.
- Housing Starts/New Construction – A new construction shortage began accumulating in 2009, which has resulted in our country being 3.24 million units short of what we need to meet demand in 2019. Our country currently needs to build 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 leaving the business post-recession, increases in expenses due to lack of qualified tradespeople, rising prices on building supplies and land costs, increased build time, newly-added requirements based on water and environmental issues, and increased permitting time, we expect this situation will continue to worsen and may even result in a shortage of 3.98 million units by 2022.
- 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. We predict that national median sales prices will continue to grow between 3.6%-5.3% in 2020.
- 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. We expect they could actually reduce them again over the next several months. 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%.
There are several issues that may affect the real estate market in unforeseen ways in 2020 including potential trade wars, political uncertainty, the level of national debt, the upcoming Presidential election, and growing environmental concerns. However, those unpredictable factors are what make our job so exciting (and important!) We would love to help you navigate the real estate market this year — please reach out if you are interested in learning more about services.
For additional information and predictions on our local market, please call or text: (425) 327-3915 or send an email to colette@therardenteam.com.