Buying, Finance, Selling a Home

What The 2020 Real Estate Market Could Look Like

It’s no secret that the real estate market frequently sees pivots, changes, and even crashes. After surviving the recent recession, many homeowners and investors are paying close attention to the market and its changes. As trends and the economy changes, so does the real estate market, so what can we expect to see in the 2020 real estate market? Freddie Mac, a government-owned entity that backs mortgages, recently released their 2020 market predictions.

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Key 2020 Takeaways: 
  • Homeowners that are contemplating selling in the new year can realistically expect a stable market
  • We can expect to see more home buyers capitalize on the relatively low rates in 2020
  • As more homeowners opt to refinance rather than sell, this will play a contributing factor in the inventory shortage
  • Buyers that may have been out of touch with the market for several years, should prepare themselves to experience rejected offers, bidding wars, and longer than anticipated home search times

It’s no secret that the real estate market frequently sees pivots, changes, and even crashes. After surviving the recent recession, many homeowners and investors are paying close attention to the market and its changes. As trends and the economy changes, so does the real estate market, so what can we expect to see in the 2020 real estate market? Freddie Mac, a government-owned entity that backs mortgages, recently released their 2020 market predictions.

Home Sales Will Increase

As with each year post-recession, home sales will continue to increase according to Freddie Mac. Both new construction and existing sales will see an overall rise. In fact, Freddie Mac predicts that home sales will rise from 6 million (2019) to 6.1 million in 2020. Increased home sales are an indicator of a strong real estate market, and homeowners that are contemplating selling in the new year can realistically expect a stable market.

There Will Still Be A Lack Of Inventory

A common real estate theme post-recession is a lack of inventory, and 2020 will be no different. According to Forbes, part of this is fueled by homeowners attempting to recover lost equity from the recession, and another factor is longer homeownership tenures–including Baby Boomers. Of course, the lack of inventory pays a big factor in real estate prices and the fierce buying competition seen in parts of the country.

Home Prices Will Increase

Although many argue home prices are already outside the affordable range, Freddie Mac predicts an increase of 2.8% in home prices. While this may be unwelcome news for home buyers, this increase is less than Freddie Mac’s prediction for 2019 of 3.3%. As the inventory of available homes remains tight, the prices will tend to increase. In summary, the common factor of supply and demand will affect pricing in 2020.

Interest Rates Will Increase…But Slightly

The real estate market is already experiencing low-interest rates which has helped to spur activity in the market. And while Freddie Mac predicts interest rates will slightly increase to around 3.8%, this still remains within the realm of appealing interest rates. The increase is still a far cry from the days of 19% in the early 1980s, and it’s almost less than half of the highest interest rate pre-recession in 2006. Having lived through the recession, most home buyers are more cognizant of the power of a good interest rate, so we can expect to see more home buyers capitalize on the relatively low rates in 2020.

More Homeowners Will Refinance

According to Freddie Mac, approximately $789 billion refinance originations occurred in 2019. As interest rates remained low, homeowners, especially those experiencing high-interest rates from the pre-recession era, opted to refinance their current mortgages and stay in place. This will remain true for 2020; however, there will be slightly less in totally refinances originations for a total of $785 billion. Of course, as more homeowners opt to refinance rather than sell, this will play a contributing factor in the inventory shortage. If you or someone you know is looking to refinance in 2020, check out the Homes.com Mortgage Hub which has information on prequalifying or applying for a mortgage as well as a mortgage calculator. 

It’s Still All About The Millennials

Just about every industry is reiterating the power of millennials, and real estate is no exception. In fact, more than 25% of millennials, the nation’s largest generation, stated they want to purchase a home in 2020. As more millennials drive the market, the demand may be greater than the supply, therefore, increasing prices and competition. Sellers in 2020 would be wise to cater to the home buying demands of this generation as they’ve proven they’re willing to pay up for certain amenities and features in a home.

What This Means For Sellers

While low-interest rates, increasing demand, and limited inventory may all sound like great news for sellers, it’s important to remember one thing: you buy into the market you sell into. While a homeowner may be able to sell over list price due to increased demand and competition, they may also experience the same thing as a buyer. Buyers that may have been out of touch with the market for several years, should prepare themselves to experience rejected offers, bidding wars, and longer than anticipated home search times. Utilizing a licensed Realtor or real estate agent, however, can greatly ease this burden and make the process seamless. Madeline Smallwood, Realtor at Keller Williams Market Pro Realty in Bentonville, Arkansas advises buyers that, “I think a shortage is going to continue into 2020 with prices rising. Buyers will need to come into the market planning to make solid and clean offers…That shouldn’t scare them away from buying in 2020 as long as they have an experienced agent on their side who can help them make an informed decision.” Find your perfect agent on Homes.com with our Find an Agent tab. 

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Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She's passionate about the power of real estate. She's also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

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