If I told you five years ago that in 2020, we’d see 30-year fixed interest rates at 3.7%, huge buyer demand amid an inventory shortage, and +2.5% to +5% home value appreciation, you probably would have gladly signed up for those market conditions!
Well, that’s the scenario we’re looking at heading into 2020, as industry analysts and economists forecast a slowing - but still positive - real estate market, bolstered by this prolonged low-rate environment and a surge of buyer demand from Millennials.
Of course, the economy is facing an inevitable slowdown as the roller coaster can’t go up forever, and we have some serious debt and housing affordability concerns.
But there’s mostly good news in the housing sector, and Realtors and mortgage lenders still play a vital part in education, leading, and serving consumers to smart home buying and selling decisions.
So, as we’re kicking off 2020, here are 10 talking points for you to share with your clients, followers, and friends.
1. Home price appreciation will be steady instead of spectacular, but still positive.
In 2019, we saw home prices appreciate 3.5% across the U.S. (according to CoreLogic). Despite affordability concerns and years of price gains, CoreLogic expects appreciation to climb to 5.6% by the end of 2020! Others are not so optimistic, but still predict modest (+2.8%) price gains in 2020. In California, the California Association of Realtors anticipates modest but stable +2.5% home appreciation gains.
2. Mortgage rates will stay low…and even drop again!
Among economists and experts, there's an "emerging consensus" that mortgage interest rates will stay low in 2020. Although we never know where rates may go, some respected organizations like Freddie Mac and the Mortgage Bankers Association predict that rates may even drop a tick next year to 3.7% for a 30-year fixed. Incredible!
3. Millennials are really ready to buy.
In 2019, Millennials accounted for 46% of all new mortgage originations and 45% of all home buyers, which led all generations by leaps and bounds. That trend will continue and grow in 2020.
4. But the Baby Boomers are staying put.
Instead of selling their homes to downsize, move and buy again, or change their lifestyle, Baby Boomers are opting to age and retire in their current homes. In fact, only 17% of home buyers last year were Baby Boomers, and it's estimated that they're "sitting on" 1.6 million homes across the country that normally would be up for sale if past trends continued.
5. Low inventory and an entry-level housing shortage.
In most markets across the U.S., inventory remains low, meaning that buyers are facing fewer choices, more competition, and upward price pressure. That inventory problem will get some aid from new homes, but not much. In fact, building pace still falls shy of historical average production, and many developers have built higher-end homes – not affordable starter homes where inventory is sorely needed.
6. Nesting instead of moving up.
Another part of the inventory problem is that homeowners are staying longer before they sell and move. The average homeowner now stays in their residence for 13 years before putting it back on the market, up from an average of 8 years in 2010.
7. Home prices not likely to fall.
The economy may take a downward turn in 2020, but that doesn’t mean the housing market will take a hit like we saw during the last recession. According to data from ARCH MI, a leading real estate statistics analyst firm, the chance of home price declines throughout 2020 AND 2021 is just 11%. So, home price growth may slow, but it’s very unlikely we see them fall!
8. A shortage of affordable homes for first-time buyers.
Entry-level and affordable homes will see the most effects of short inventory and tight competition, creating a real crunch among first-time buyers and Millennial buyers.
9. But the luxury market will hum along.
The high-end real estate market should remain stable throughout 2020, with greater inventory levels (by percentage, not volume) than other price points. That abundance of inventory should nudge some sellers to cash out, while plenty of buyers look to take advantage. Prices may be flat or even drop a notch on the high end, but the market will remain dynamic and stable.
10. It’s all about the tech!
The process of searching for, buying, and selling a home continue to be more tech-oriented, with smart apps, mobile home searches, smart homes, and social media marketing for listings. That's especially true for Millennials, as 98% of buyers in this age bracket search for homes online, and 80% of them found the home online that they eventually bought last year.
I hope those ten talking points help you kick off 2020 with good news about the real estate and mortgage market!
And if you need any help with your marketing, lead generation, and client outreach in 2020, you know where to find me!