According to realtor.com’s 2020 Economic Forecast, the new year will bring some important changes to national real estate trends. Millennials will lead the way, taking on more mortgages than Baby Boomers or Gen Xers as they compete to secure affordable housing. Buyers across the country will enjoy more opportunities for home ownership, but will also likely struggle to find the perfect home while inventory remains low. Sellers who want to benefit from steady buyer demand will need to respond to local market conditions and take a thoughtful approach to pricing. For a more detailed overview of what to expect in 2020, take a look below.
Nationwide, the housing market remains years away from reaching a sufficient supply of homes to meet the demands of today’s buyers. While there have been improvements to new construction and short bursts of hungry sellers, senior economists predict that 2020 will not bring a solution to the nationwide housing shortage; in fact, inventory could reach a historic low level this year. This could be great news for sellers who are willing to adjust their expectations to local market trends, as demand will likely only continue to grow.
Buyer demand will remain vigorous in 2020, particularly for entry level properties. As 4.8 million Millennials turn 30 this year and hit the prime home buying take more than half of all mortgages in 2020, outnumbering both Baby Boomers and Gen Xers for the first time, who are predicted to take 32 and 17 percent of mortgage originations respectively. Despite the myths that Millennials only want hip urban apartments within walking distance to everything, realtor.com predicts that Millennial buyers will continue to look for modest-sized suburban homes with locations suitable for multi-stop commutes, including daycare, elementary school, the grocery store, and place of business.
The senior economists at realtor.com believe that 2020 will bring a slight decline of 1.8 percent in existing home sales, largely due to the lack of inventory and a moderation in price growth that will likely relax sellers’ expectations. This projected decline in sales will accompany a flattening in price growth, but because the demand for affordable, entry-level homes will remain particularly strong, prices are estimated to increase by 0.8 percent overall in 2020.
2020 Predictions for Buyers
Some buyers will see new opportunities in 2020 as the supply of new homes and price moderation relieve some of the pressures of low inventory. New home construction in 2019 was largely high-end, but with the luxury market cooling down, builders are now looking to increase offering for the mid-price segment, a welcome shift in market dynamics. First-time buyers will continue to struggle finding affordable homes, even though mortgage rates are reasonable, because inventory is so low that demand is far outpacing supply.
2020 Predictions for Sellers
Nationwide, sellers will experience a bit of flattening price growth and slowing activity, which means they need to be more patient and take a more thoughtful approach to pricing their property. Sellers of homes priced for entry-level buyers should expect the market to remain highly competitive and for prices to stay firm. For sellers of luxury homes, however, it will take a little longer for those properties to sell. Sellers should consider adding incentives to close the deal and also adjust to local market conditions accordingly to stay on more buyers’ radar.