Housing Market Prediction: What to Expect in 2020


Given skyrocketing home prices throughout most of the country, many prospective homebuyers in the US nowadays are probably feeling some pressure to quickly lock in a deal. A majority of Americans are concerned that the US housing market will crash in 2020. A recent survey indicated that 57 percent of homebuyers agreed that there would be a “housing bubble as well as price correction” by 2020.However, despite these predictions, some experts contend that those who wait a few years may be rewarded.

There is no denying that the real estate market in 2019 experienced modest increases across the board; however, there were some hot spots in the housing market with regard to both price ranges and geography.

What Do the Experts Think

US real estate market predictions for 2020 and beyond tend to run the gamut from very optimistic to pessimistic. Zillow, for example, predicts that in 2020, there will be a housing recession. It is worth noting that this housing market prediction dovetails with a recent survey of economists performed by The Wall Street Journal. According to them, the economic growth that spurred in 2009 and is considered the second-longest in U.S. history will likely come to an end in 2020.

They also contend that current economic expansion in the country is getting long in the tooth by most historical standards; also, more late-cycle signs are starting to emerge. As far as the US commercial real estate industry is concerned, 2020 might be a pivotal year, with economic, geopolitical, and local regulatory and legal issues in keen focus. CBRE’s 2020 U.S. Outlook, for example, predicts an excellent year for US commercial real estate.

Political and economic uncertainty in the US has made things feel a bit unmoored. On the other hand, the overall insight conveyed by industry authors—Urban Land Institute and PWC researchers that surveyed 1,450 industry members and interviewed about 750 think that we are in for a soft landing, and not a sudden and dramatic crash.

Some Warning Signs of a Housing Market Crash

According to real estate gurus, there are many signs that the US housing market is about to crash. Some of them are fewer affordable homes, increasing home prices, an increase in the number of unregulated mortgages, and a higher number of flippers. It is no secret that many housing markets in the country were hit very badly during the Great Recession.

Nowadays, there are many speculations that there might be another economic recession in the US and a real estate market crash in 2020.

It is worth noting that a majority of market crashes occur when asset bubbles have popped. Rising home prices in the country are one main sign of a potential bubble. Note that in 2018 the national average home price reached a record high of about $202,672. According to the Case Shiller Home Price Index, this was almost 10 percent higher compared to the 2006 record high of $183,488.

Although the housing market bubble in the US prompted the last recession, many experts think that the slowdown in the US housing market will not play a major part in the next one. Similar to the Case Shiller Home Price Index, the S&P Homebuilders Select Industry Index has also increased by 13.32% since 2009.

Note that in the meantime, affordable housing also plummeted, which is a cause of concern. In 2010, more than 110% of rental units throughout the US were affordable for a majority of low-income households. However, by 2016, that rate had dropped to a modest 4.3%. This is one of the big warning signs. Keep in mind that this shortage is the worst in US cities where house prices have soared.

Prices will Continue to Rise

According to industry experts, home prices in the US will continue to climb upward, mainly thanks to high demand and tight inventory. The National Association of Realtors predicts an increase of about $274,000 in the median home price for 2020. It is worth noting that experts have similar predictions for property appreciation rates.

As per the most recent VeroFORECAST™ report, US housing market data indicate that the expected appreciation rate (average) for residential real estate in the hundred largest markets in the country will be 3.7 percent over the next year. There seems to be ample consensus among experts in this regard.

There aren’t a ton of new real estate listings. However, without more housing listings coming on the market, experts think that more competition will start in early 2020. This will lead to even more price pressure. Also, according to mortgage insurers, this problem will likely be worse, especially on the lower end of the price spectrum.

More demand and less housing supply in the market mean bidding wars will rebound, especially in the first quarter of 2020.

Keep in mind that entry-level house prices in the US will increase higher than average incomes in the next year—and low construction numbers are likely to compound the problem.

However, you have to bear in mind that these real estate market trends and predictions tend to vary by region; this is because housing demand and supply in the country are key discriminators between various markets. Note that some markets might see a big jump while others may see only relatively small gains.

Demand and supply will become more balanced a little later in the year because more listings of both existing and new homes will hit the market, which will allow price growth to moderate to about 3%.

Mortgage Rates to Stay Low

This is another facet of the housing market where there is a consensus. Mortgage rates in the US housing market hit rock bottom in late 2016, and mortgages are now available in the country at rates below 4 percent, according to Freddie Mac. According to experts in the US housing market, this trend is expected to stick around in 2020 as well. Thirty-year fixed mortgage rates in the US will remain low throughout 2020, hovering around 3.8% for the better part of the year.

In the face of slowing economic growth, the US Federal Reserve will likely keep interest rates low. It is also worth noting that banks and other financial institutions are not selling as many foreclosures as they did in the past, while cash investors in the country are scooping up many houses and converting them to rentals. As the cost of renting a property is going up too, buying a home now seems like a more feasible option for most people.

While the US housing market is currently quite strong, weakness in many other sectors, such as manufacturing, is really pulling down on the US economy.

This drop in mortgage rates triggered a surge in refinancing, especially over the past couple of months, and purchase activity in the country ticked up as well.

Refinancing will Pick Up in 2020

Mortgage rates in the US are now hovering below 4 percent. In addition, home prices in the country have risen consistently over the last few years. Refinancing activity surged during the fall of 2019 as a result of those 2 trends. The Mortgage Bankers Association stated that during the final week of October 2019, their “Refinance Index” had climbed by 134 percent over the same week last year. It is worth mentioning that rising home values and low rates have a lot to do with this.

Digitization will Continue in the Real Estate Industry

It is no secret that the real estate and mortgage spheres in the US have been gradually moving away from their traditional and manual, paper-laden processes in the past few years. Note that smart home adoption, particularly security cams and digital assistants, are increasingly common these days. They will be even more common with the rise of 5G in the US.

In 2020, we will only see that this trend will expand further. This is especially true as more and more tech-savvy Millennials are entering the housing market.

According to data from Realtor.com, Millennials made up a substantial 46 percent of total mortgage originations in the US in September—up from 43 percent one year prior.

Experts think that in 2020, we will continue to see more Millennials increasing their share of the US mortgage market. This, in turn, will be a catalyst for lenders and banks to continue to quickly innovate their various technology offerings in order to meet the expectations and needs of an audience that is more familiar with an Amazon, Venmo-like experience.

Final Thoughts

We can say that the US real estate market is ripe for investment in 2020, which makes it a great time to purchase residential and investment property. Note that a multi-generational real estate market in the country is creating limited supply and hence increased competition, and this is driving up prices.

Overall, the US housing market predictions for 2020 are not overwhelmingly pro-buyers or pro-sellers. This is mostly good news all around for the US housing market. For sellers, there is a healthy group of homebuyers looking for new properties. For homebuyers, prices are not increasing at such a steep rate that they cannot keep up with them.

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