1 Interest rates: In terms of 2020’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.
2 Inventory: 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.” You must become more creative, more aggressive and less dependent on the MLS to find properties. Heavier networking with your centers of influence, knowledge of new construction and most importantly, BE the listing agent!
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3 New Construction: Realtor.com’s forecast for 2020 does see an uptick in new construction (+6%), however, such new construction will not provide much relief to first time buyers or people looking in the lower price ranges. The cost of construction and land acquisition has forced builders to build mainly in the higher price ranges. This isn’t true everywhere, however. There are still builders who are creating subdivisions in moderate price ranges. Know what’s happening locally! Just because you don’t see it in the MLS or on your drive to your office doesn’t mean it’s not there.
4 Prices: 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. They didn’t mention what ‘going negative’ means in percentage points, but keep this prediction on your radar. Be very cautious and accurate with your comparative market analyses.
Home prices are expensive in the big cities and they are creeping higher in growing metro areas like Charlotte, Austin, and Phoenix, but consumers are strong, debt levels are relatively low, and lenders are less apprehensive about lending than they were a decade ago. The real question is whether younger buyers have the desire to own homes. That’s not going to impact the 2020 housing market, but it is the $10 trillion question for the next decade.
5 Recession?: Not likely in 2020. All the leading economic indicators still have some juice in them, despite the fact that manufacturing and industrial production have been slowing. The resolution of the trade war with China will help boost corporate confidence, and the U.S. consumer remains strong due to a healthy jobs market, low inflation and low gas prices.
In a recent Zillow poll of 100+ real estate experts, the results showed that more that 50% of respondents BELIEVE there will be a recession in 2020. Most common reasons stated were the feeling that housing prices have more than recovered from the housing crash and that such price increases are unsustainable. Most agents also believe interest rates will go up and create stagnation in the market.