Realtor.com forecasts that 2020 sales could drop by -1.8% to 5.23M while sellers, and Baby Boomers in particular, cause more inventory gridlock by staying in their homes to “age in place.” Realtor.com also forecasts that prices will likely rise just +0.8%.

According to Redfin, the typical homeowner is spending 13 years in their house, up from 89 years in 2010.

George Ratiu, senior economist with realtor.com, said, “2020 will prove to be the most challenging year for buyers, not because of what they can afford but rather what they can find.”

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In terms of 202’s economic picture, realtor.com sees mortgage interest rates running at a continued low at approximately 3.85% for a 30-year fixed rate loan. This prediction of 3.85% is consistent with Fannie Mae’s 2020 interest rate forecast of 3.9%.  Additionally, realtor.com does not foresee a recession in 2020 but does see the economy softening due to global trade issues. (President Trump’s latest comments about the trade war with China likely lasting through next year’s election only adds to this concern of a softening economy.)

Reflecting upon the above economic picture, Ratiu said, “This (economic) outlook is likely to influence Baby Boomers to stay in place. With housing prices expected to stabilize (with just a +0.8% price increase predicted) and concerns over economic uncertainty, there will be little incentive for Baby Boomers to sell in the coming year.”

Realtor.com’s forecast for 2020 does see an uptick in new construction (+6%), however, such new construction will not provide much relief to the critical inventory shortage. The forecast report stated, “Despite an increase in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. The construction of new homes in 2019 was largely isolated to upper-tier housing and that is unlikely to ease conditions for first time homebuyers.”

The supply of entry-level homes is not just below historic levels, it is “well below historic levels,.” According to Ratiu. Wall Street and other large investors snapped up millions of distressed properties at the beginning of this decade and instead of re-selling, they hung onto these homes and turned them into rental properties. In doing so, the single-family rental segment of the housing market is now a new, lucrative asset class with large-scale multicity service and maintenance platforms.

Ratiu said, “The supply of rental properties has risen in tandem with demand, while new residential construction has lagged, placing the rental market in a good position to offer alternatives for buyers priced out of their markets. However, the affordability challenge will continue to cast a shadow over housing in 2020 as both home prices and rents remain elevated.”

Speaking of mostly younger first-time homebuyers, realtor.com predicts, “They will be searching for family-friendly lifestyles…” and affordability near large metros. Realtor.com foresees these younger first-time buyers producing market upticks in Arizona, Nevada, Texas, Georgia, Florida, and the Carolinas.

Importantly, for the first time in this decade-long economic recovery cycle, realtor.com foresees home prices in some cities “going negative” in 2020. These cities include San Francisco, Las Vegas, Saint Louis, Dallas, Chicago, Detroit and Miami.

Thanks to CNBC’s Diana Olick, HousingWire and realtor.com for source data.

Also read: Is Timing Everything in Real Estate?, Home Prices Rise Across Opportunity Zone Redevelopment Areas, Which Metros Have The Most “Bargain” Houses?