The housing market in the United States is expected to continue to firm, with the economic research team at Freddie Mac declaring that real estate will make it to the top spot in the American economy. In a recent report, Freddie Mac, the government-sponsored buyer of mortgage loans, polled their economic research team about housing market predictions in 2020. The report revealed these housing market insights:
- Home sales are expected to increase next year
- Prices of homes will continue to rise due to limited supply and demand
- The relative lack of inventory in 2019 will carry on to the next year
- Mortgage rates will also increase slowly
- Many homeowners will likely be forced to refinance in 2020
Let’s take a closer look at the report’s predictions for 2020 real estate trends below.
A Strong Real Estate Market
According to Freddie Mac’s latest research, the U.S. real estate market has never looked better. In fact, they say housing will be among the top contenders in the nation’s economy. Chief economist, Sam Khater, stated that the housing market will remain solid, with more building permits, new house starts and existing and new home sales continuing to increase.
Home sales will likely hit six million by the end of 2019 and then increase to 6.1 million in 2020, due to lower mortgage rates. Millennials will also be hitting the ideal home-buying age in 2020. At the same time, baby boomers, retirees and divorcees will be downsizing and selling their 2500 sq. ft. homes to move into smaller starter homes.
Rising Home Prices and Increased Demand
While home sales increase, home prices will also be on the upward trend. According to Freddie Mac, home prices will slowly rise in 2020, and this isn’t new — house values have been increasing over the past few years, creating an affordability problem for many buyers.
75% of renters say they just can’t afford to buy a home, and this is understandable because home prices are appreciating much faster than wages. Mortgages will not be spared either. Freddie Mac predicted an increase from 3.7% in 2019 to 3.8% in 2020.
At the same time, the housing market is expected to experience a shortage of homes for sale, as demand is at an all-time high. There has been a 3% drop in inventory in 2019, and this will carry on to 2020. The construction industry has been struggling with land scarcity along with labor shortages, which will likely compound the issue. Affordable homes will be especially hard to find. First-time buyers looking for starter homes in 2020 should be very patient, because it may take some time to find the ideal home.
Refinancing activity is also expected to pick up in 2020. The Mortgage Bankers Association reported a 134% increase in the Refinance Index compared to one year ago. You can expect to see more homes refinanced next year, as people take advantage of the current low rates and surge in equity.
A Good Time to Buy
In short, the US real estate market is ripe for investment in the coming year, making it the perfect time to buy homes. A competitive, multi-generational housing market will lead to an increase in demand, driving up the prices of starter homes. Markets which favor the young generation’s ideals will witness a price increase of 8%-15% in 2020, while other real estate will appreciate at the same rate as inflation.
Want to learn more about purchasing or selling a home in 2020? Contact CENTURY 21 Core Partners today to see how we could help.