Lawrence Yun, the chief economist for the National Association of REALTORS® (NAR), predicts that new home sales will jump +11% in 2020. He also predicts that sales of existing homes will increase +3.7% to 5.56M, the highest level since 2017.

Yun said, “Some loosening in inventory will happen in 2020, so we expect home sales to rise. We’ll see an increase in inventory, but not any over-supply, so home prices should continue to move higher – our hope is in a much tamer fashion.” Yun anticipates the median price of existing homes to increase +4.3% into 2020 with a price of $270,400. This expected increase in price is a slower pace than the +4.9% annual gain Yun forecast for 2019 and the +5.7% price increase he forecast for 2018.

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As homebuilders try to meet the demands of first-time buyers, Yun predicts that new home prices will come in at $313,500, a -4% decrease from this year’s expectations. This anticipated lower new home price reflects smaller sized homes.

Yun also predicts that interest rates will hover around 3.7% for a 30-year fixed rate mortgage through Q2 2020. Though Yun expects “sub-4” rates to continue through 2020, he sees a slight rate rise to 3.8% in Q3 and Q4 2020.

“We’re seeing some rates on yields rising, but even with some fluctuation, I think mortgage rates will be slightly under 4% for 2020…my reasoning for (this prediction) is the Feds saying they would not be raising interest rates in 2020 given that the inflation rate is under control.”

On October 30 of this year, the Fed cut its benchmark rate by a quarter of a percent for the third consecutive time this year to keep the decade-long US economic expansion going. The Fed also simultaneously signaled that it’s unlikely it would cut rates in the immediate future.

Yun is also quite confident the US will not be facing a recession in 2020 due, in part, by the economic stimulus provided by homebuilding. According to the US Department of Commerce, “fixed residential investment,” AKA homebuilding, contributed 0.18% to the GDP in Q3 2019.

Yun’s bottom line? “We need to produce more homes…if we produce more homes, that is an economic stimulator and that growth will prevent us from going into a recession.”

 

Thanks to InmanNews for source data.

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