Wouldn’t it be nice to have a crystal ball, to see into the future of the housing market? While we can’t offer you that, we can refer to the most recent Metrostudy predictions for the future of mortgage rates, new construction, and inventory trends in the year 2020.
Let’s start with mortgage rates. According to Mark Boud, Metrostudy’s chief economist, mortgage rates will hit their apex at 5.8 percent in 2020 and 2021. Recently, mortgage rates have increased which has negatively impacted affordability for many prospective buyers. Bound is quick to point out, however, that the recent increases are not significant when taking historical trends into consideration.
Nationwide, inventory is substantially under-supplied, and at the same time, homes are increasingly overvalued. While some might believe a price collapse is imminent, Boud doesn’t believe that will be the case. He explains that part of the reason for low inventory is trade increases and imposed tariffs, including those on lumber, steel, and aluminum. The impact of those tariffs could easily lead to an increase of $2,000 in construction costs per house. The top-heavy, upper price range market we see today will level out by 2020, according to Boud’s projections.
Boud further states that we should not be concerned about another devastating housing bubble, because economic growth will likely slow down by 2020, which will result in tighter lending policies and a less competitive market. In fact, Boud recommends keeping an eye on inflation, which rose 2.9 percent in August. Boud believes the national debt could put the breaks on economic growth, which would result in the leveling out of interest rates by 2020.
In the meantime, the current national economy is a healthy one. America gained 2.4 million jobs in the past 12 months, which has increased the demand for housing. The lower unemployment rate has encouraged new buyers to enter the market. New construction, according to Boud, will continue to increase before plateauing in 2020.