In 2018, the housing market witnessed what experts referred to as a cool-down. This came from mortgage rates reaching upwards of 5%, and even more in some areas of the country. However, despite predictions that 2019 would continue a trend of rising mortgage rates, the opposite happened, and instead, rates fell to around 4%. To get an idea of how things will fare in 2020, here are the top Housing Market Predictions.
House Prices Are Still Rising
Over 2019, home prices grew 3.3%, but this was lower than in 2018 (5%), and that trend appears to be continuing in the new year. Currently, some experts predict that housing prices, while still rising, will only rise by 2.8%.
However, this does not tell the full story, and CoreLogic believes that there will an increase by September of 2020, where housing prices will grow by 5.6%, caused by tight inventory and high demand. With fewer houses on the market, there is a rise in price pressure.
Mortgage Rates Are Still Low, For Now
Despite the rise in prices, mortgage rates will remain steady, hovering around the sub-4% that buyers enjoyed throughout 2019.
For people looking to purchase a home or refinance their existing home, now could be the time to do it, since rates are not expected to move lower in the near term.
Most Home Buyers Are Millennials
In 2018, Millennials accounted for 37% of buyers, which was the largest demographic in the country. Mainly, these purchases were made using online resources, where nearly all Millennials utilized the internet, whether a desktop computer or a cellphone, to identify the property.
Millennials searching for a new home will consider what is important to them, such as easy commutes into the city vs. property size.
There Is Still a Shortage of Homes
There are simply not enough affordable new homes being built to accommodate the demand of first-time homebuyers. Last year, 1.25 million new homes were constructed, but too few of them were suitable for first-time buyers.
Therefore, it’s been suggested that we could see record low home inventory in 2020.
Multiple Offers Will Come In
With a lack of availability, sellers could see an increase in how many offers they receive after putting their home on the market. This creates a competitive housing sector. In 2019 there was a lack of bidding wars, which could change in 2020.
With increased mortgage affordability and the lack of demand, bidding wars could increase as first-time buyers look to snap up their dream home, firmly creating a seller’s market.
Broader Selection of FHA Lenders
The Federal Housing Administration cut back on underwriting for loans over the last couple of years due to sanctions imposed by the Federal Government following perceived errors. In its place, non-bank lenders took their place. However, 2020 shows signs that things could return to normal.
While lending errors may still be punished, it will not be as severe as in years past. This spells excellent news for borrowers, as it could result in lower overall mortgage costs.
Increase of Automated Offers
As you’d expect from the Millennial preference of using online resources, automated offers, or iBuyers, will start stepping towards the forefront of the housing market. It’s unlikely these services will replace real estate agents completely, but with automated offering and acceptance, these services help to streamline the process.
Companies working in this area include Zillow Offers, RedfinNow, and Opendoor. Currently, they only operate in select markets, but expansion is always on the horizon.
MLS and NAR Lawsuits Could Change Home Selling
The Multiple Listing Service could be in for a shift with the antitrust investigation carried out by the Justice Department. The investigation seeks to know whether local Multiple Listing Services allow buyer’s agents to filter listings by commissions, thus hiding listings from clients with a low commission in the agent’s opinion.
Simultaneously, class-action antitrust lawsuits accuse large brokerages and the National Association of Realtors of forcing sellers to pay inflated commissions to buyers’ agents.
These actions could result in buyers moving away from the MLS, and purposely working with real estate agents not inflating their commission.
Single-Family Homes Will Be Smaller
Since 2016, the square footage of newly built family homes began to shrink, and that trend will continue into 2020 and possibly beyond. The square footage of homes is still larger than it was 30 years ago, with the average home measuring 2,386 sq.ft. However, it is also down from the 2,467 sq.ft from 2017 – 2018, where there was a slight rise.
Reasons for this include the desire for more compact but convenient living spaces for Millennials as well as the lack of affordability. With the preference for urban areas over suburban, the shrinking house trend looks set to continue.
The Housing Market in 2020
Housing predictions suggest that 2020 will be a sellers’ market. However, buyers that use the tools and resources available, including knowledgeable real estate agents and mortgage lenders, will be able to find a great home.
Marimark Realty is a full-service real estate company in Tampa, Florida. Our focus is on providing a personalized experience for both buyers and sellers of residential and commercial properties, as well as investors.
To begin the journey of purchasing or selling your home, or purchasing commercial or investment properties, contact us at your earliest convenience.