2020 – A BUYERS MARKET?
Will 2020 become a buyer’s market? Time will tell.
It’s December, and all eyes are on the new year. Without a crystal ball to predict whether 2020 will continue to be more of a seller’s — rather than transitioning into a buyer’s — market, the best we can do is to keep you aware of the current situation and how it may affect your clients’ decisions to buy, sell or wait. Trends in the real estate market are influenced by inventories, home prices, interest rates, days on market, regional differences, population shifts, global stability and more. Let’s take a look at the implications of a few of these factors.
Housing inventories.
As of September, year-over-year housing inventories had fallen nationally for 42 straight months, going back to 2016. This shortage of homes could have increased competition and may have driven up prices for homebuyers, especially for entry-level and mid-priced buyers. The more expensive housing market has largely escaped this imbalance. New this year, inventories at all price levels have begun to stabilize.
Home prices.
Dating back further to 2013, the rise in home prices has outpaced income gains by 31%. This discrepancy has contributed to the lack of affordability of homes in recent years. Since the start of this year, the acceleration rate of home prices has begun to moderate, including in more than half of our nation’s 35 largest metro markets. Some forecasts put the appreciation rate for 2020 on a steady 3.7% pace. If this were to hold true for next year, it would become another indicator of a healthier balance between buyer and seller.
Mortgage interest rates.
Historically low over the last several years, fixed mortgage rates are poised to drop even lower. For starters, they tend to follow long-term bond rates, such as U.S. Treasurys, which have fallen markedly this year. Additionally, mortgage rates are inclined to contract during times of global and economic uncertainty; one aspect is the U.S.-China trade dispute. Another is next year’s election. And while these factors point toward a buyer’s market, it’s important to remember that even a lower mortgage rate doesn’t help with down payments. Taken together, this could translate into a general slowdown in the housing market.
Millennial impact.
Another important consideration, before putting undue confidence in a 2020 buyer’s market, is the impact of the immense millennial market. Without a dramatic uptick in inventories and over 70 million millennials in their peak home buying years, the pressure on demand for entry- and mid-level homes in metro markets could help sustain the persistent seller’s market.
Thank-you Corey Wilson with Bank of America for this insightful look at the Lamorinda Real Estate Market. coreywilson@bankofamerica.com; 925-451-1667
