2020 Real Estate Trends and Market Predictions You Need to Know
It's a new year! As a home buyer or seller, you may be wondering about the real estate market conditions are looking like for 2020. We can help! We've gathered some market trends and predictions for the year ahead straight from the experts. Here's what you need to know. Need help with the local Topsail Island real estate market? Century 21 Action Topsail would love to be your local experts. Contact us today!
REAL ESTATE MARKET TREND #1
Home prices are still on the rise. (slowly)
According to Dave Ramsey, home prices grew slower in 2019 (3.3%) than in 2018 (5%). And this year seems like it will be no different. In fact, real estate experts predict that home prices will only rise by 2.8% in 2020. Time will tell, but you can expect home prices to slowly continue to rise—but it won't be gangbusters.
What does this mean for home buyers? If you’re going to buy a home in this year's market, you absolutely must find out how much house you can really afford. Crunch the numbers yourself with a free mortgage calculator and figure out a monthly payment your budget can handle. Commit to staying within that budget amount. Don’t rush into a home purchase that doesn’t make financial sense for you no matter how much pressure you feel watching competitors pluck good homes off the market.
What does this mean for home sellers? A nice profit may be on the horizon! But also keep in mind that a lot of buyers are being priced out of the market at the moment, which could lead to fewer offers for your home. So, what should you do about this? Be aware of your competition. With less offers to go around, you want your home to really stand out from similar ones in your area. Prepare your home for potential home buyers and work with a real estate agent to help you list your home at the right price. And be sure to wait for the right offer. Some buyers may try to gut punch you with a low number. If you aren’t in a hurry to move, wait for an offer that gives you the most profit.
REAL ESTATE MARKET TREND #2
Mortgage rates are declining (for now).
Ramsey also notes that mortgage interest rates went down in 2019—steadily dropping below 4% for common types of loans. In 2020, economists think interest rates will stay around 3.7% for a 30-year mortgage and 3.2% for a 15-year mortgage. (At the writing of this blog, the current rates are 3.64% for a 30-year and 3.15% for a 15-year according to Bankrate.com.) But this is never a guarantee because things like tariffs and trade wars might gradually shift the economy, which could result in the Federal Reserve slowly increasing interest rates to balance things out.
What does this mean for home buyers? Even though interest rates are relatively low, if you’re not able to buy with cash, be smart and go for a conventional 15-year fixed-rate mortgage. That way, you know exactly what your payment will be over the life of the loan.
What does this mean for home sellers? If interest rates stay low, buyers will be more motivated to buy your home sooner than later. But if interest rates do start to increase later in the year, just plan for your house to be on the market a little longer. A mortgage is a big commitment, and adding higher interest rates to the mix will make many buyers pause. An experienced real estate agent can help you set expectations for how much you can make, and how long you’ll have to wait for the right offer.
REAL ESTATE MARKET TREND #3
Millennials are the home-buying majority.
Millennials took the lead as the largest group (37%) of home buyers last year. What is a millennial exactly? Answers tend to vary on that one, but generally it's anyone born between 1980 and 1998 (but you can read more about millennial home buyers here).
What does this mean to home sellers? Know your buyer. In a nutshell, millennials are internet savvy and do their research before house shopping. It's best practice to upgrade your online listing, focus on the highlights of what your home has to offer, and know what the popular features are with this group of buyers.
What does this mean for home buyers? You'll have a lot of competition. Last year, nearly 90% of millennial home buyers used real estate agents to purchase their homes. Save yourself the stress of trying to buy on your own. Get the help of a real estate pro, so the home-buying process is smooth for everyone involved.
In 2020, more home-building activity and consequent growth in supply should tame down home price gains. That’s a healthy development for potential home buyers. Southern cities should once again do better than most other markets.Lawrence Yun, NAR Chief Economist
The move to affordability trend will continue in 2020, fueled by the twin forces of Baby Boomers retiring and seeking sunnier weather, lower taxes and lower cost of living, and Millennials searching for family-friendly lifestyles and affordable housing.
REAL ESTATE MARKET TREND #4
New home construction is on the rise.
Builder confidence is higher than it has been in two decades, according to industry experts. “Low resale inventory and generally healthy economic conditions—including the longest economic expansion in American history—have lifted builder sentiment,” wrote National Association of Home Builders (NAHB) chief economist Robert Dietz.
The NAHB expects new-home sales to be around 708,000, a 2.5 percent gain over 2019. Single-family construction, which includes for-sale housing, custom builds and built-for-rent, will increase 4 percent from 2019 to around 920,000 units.
“While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still under-building due to supply-side constraints like labor and land availability,” Dietz said. “Higher development costs are hurting affordability and dampening more robust construction growth,” according to an online article in The Washington Post.
REAL ESTATE MARKET TREND #5
Expect a competitive housing market.
According to Redfin, the online real estate brokerage (among others) predicts the housing market will be more competitive in 2020 because of low mortgage rates and a lack of homes for sale.
Competition will increase with 1 out of 4 offers facing a bidding war. Increased competition will push price growth 6 percent higher in the first half of the year, but as the year goes on, a more balanced supply and demand will allow price growth to moderate at 3 percent.
According to the National Association of Realtors, new-home sales are expected to rise to 750,000, an 11 percent increase that puts them at a 13-year-high. Existing-home sales will continue to be held down by lack of supply, rising modestly to 5.6 million, a 4 percent increase. The national median sale price of an existing home is expected to grow to $270,400, an increase of 4.3 percent from 2019.
REAL ESTATE MARKET TREND #6
Affordability is key in 2020.
With the oldest members of the Millennial generational nearing their 40s, they have broadened their housing horizons beyond the urban core. As housing prices outpaced incomes by a wide margin, millennial home buyers made a noticeable move toward affordability in 2019.
The move to affordability trend will continue in 2020, fueled by the twin forces of Baby Boomers retiring and seeking sunnier weather, lower taxes and lower cost of living, and Millennials searching for family-friendly lifestyles and affordable housing. Home buyers are increasingly looking not only at suburban environments near large metropolitan areas, but also considering options across state lines. Meanwhile, shoppers from expensive Northeast markets will find the warmer options in the Carolinas, Georgia and Florida attractive, according to Realtor.com.