The real estate market has been fairly consistent over the last few years, with low inventory in many markets pushing prices higher. High-quality homes that hit the market at a fair price were snapped up almost immediately, and multi-offer situations left sellers in a great position. Will those trends continue into 2020? What is the real estate forecast for the next five years? Here’s what you need to know.
Housing Market 2020 Onward: Real Estate Forecast
Mortgage Rates Will Stay Low in 2020
Low mortgage rates make it easier for homebuyers to borrow. This can be helpful for those looking to buy their first home or upgrade to a larger space. However, low-interest rates also mean that demand for homes will remain very high.
The recent drop in interest rates for mortgages has caused an increase in refinancing, which may mean that homeowners won’t be in a position to sell during 2020. That might mean even lower inventory, putting upward pressure on prices.
Inventory Will Remain Historically Tight
In most markets, inventory will remain at historic lows compared to demand. Interest rates are bringing new buyers into the market – especially Millennials, who had to put off homeownership for many years. However, people are staying in their homes longer than ever.
In the past, those that owned starter homes would move up into larger homes within a few years. This would free up those lower-priced houses for new buyers, and create demand for middle-market properties. Today, homeowners are staying in the houses for an average of 13 years. One factor may be that Americans are waiting later to have children – if they have any at all – and are creating smaller families when they do.
There are also cultural trends toward owning less and valuing experiences over possessions, causing homeowners to not need as much space as they looked for in the past.
Prices for Homes Will Continue to Grow
Because people are not moving, inventory is extremely low, especially at the lower end of the market. That means you really have to be an expert on your local real estate market if you want to help your clients find ideal homes. With low inventory and high demand, home prices will continue to grow. We saw a 3.6% increase this year, and indications are that prices will increase at a higher rate next year.
The biggest problem is at the lower end of the market, where there are far fewer starter homes than there are families looking for their first property. Homes are being built, but construction is focused on larger homes in the middle of the market. As mentioned above, many brokers are not seeing new listings coming to the market as expected for this time of year, which means there will be a lot more competition in early 2020 for the existing inventory.
Limited supply with strong demand and very high competition for the homes listed means that prices will soar in 2020.
Suburbs Are Becoming “Hipsturbia”
As Millennials look for affordable places to own property and live, suburbs near major metro areas are growing. Many adults are looking for a place that mixes the safety and affordability of a suburb with 24-hour amenities, transit, and walkability.
These communities, which are breathing life into smaller towns near urban areas, are developing more every day. A live-work-play community, all in one place, once revived inner cities. There’s no reason they cannot revolutionize the suburbs as well.
“Hipsturbia” is one of the top trends to watch not only in 2020, but in the housing market 10-year forecast as well.
Technologically Linked Homes Will Increase in Value
As everything from our doorbells to our thermostats become digitized, technologically savvy homes will sell for a premium. More and more Americans are not only comfortable but excited about smart-tech connectedness, and the buying demographic is now squarely Millennial.
Millennials have always been comfortable with technology and are willing to pay a premium for the security and comfort that comes from managing home systems from their mobile devices. There are also growing concerns in every demographic about the environmental impact of daily life. Technology can help reduce the environmental footprint of owning a home by incorporating automation that saves significant energy.
The easier it is to connect a home, the more valuable it will be.
Prepare for the 2020 Housing Market
Homebuyers will face a tough uphill climb in 2020 as low mortgage rates entice people to house hunt while inventory remains low. Most buyers will face a multi-offer situation and may see ideal homes leave the market almost as soon as they appear.
On the other side, it’s a beautiful time to be a home seller. If you can convince people in your target market to sell their homes and move, they will be very likely to receive multiple offers and have a bidding war drive their price higher than they expect. However, they may face difficulty securing a new home unless they are moving up in the real estate market.
Are you ready for the housing market in 2020? If you want to stay on top of the market, it’s going to require a lot of top-notch tools. One of the most important is your website. If you are ready for your website to wow prospects and convert them to clients, let us help.
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