2020 Housing Market Predictions - Real Talk w/ Brian & Dan Episode 37

Today’s Real Talk Segment we are going to talk about the 2020 real estate projections that may surprise you and expert insights on the 2020 housing market. This will be an interesting year for residential real estate. With a presidential election taking place this fall and talk of a possible recession occurring before the end of the year, predicting what will happen in the 2020 U.S. housing market can be challenging.

As a result, taking a look at the combined projections from the most trusted entities in the industry when it comes to mortgage rates, home sales, and home prices are incredibly valuable – and they may surprise you. Mortgage Rates: Projections from the experts at the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), Fannie Mae, and Freddie Mac all forecast mortgage rates remaining stable throughout 2020.

Since rates have remained under 5% for the last decade, we may not fully realize the opportunity we have right now. Here are the average mortgage interest rates over the last several decades:

  • 1970s: 8.86%
  • 1980s: 12.70%
  • 1990s: 8.12%
  • 2000s: 6.29%

Home Prices: Here are the projections of home appreciations from six different expert entities that look closely at home values: CoreLogic: 5.4% Fannie Mae: 4.1% Z’ Report: 3.9% National Association of Realtors: 3.6% Freddie Mac: 3.2% Mortgage Bankers Association: 3.1% Each group has home values continuing to improve through 2020, with four of them seeing price appreciation increasing at a greater pace than it did in 2019, which was 3.5%.

Is Recession Possible? In early 2019, a large percentage of economists began predicting a recession may occur in 2020. In addition, a recent survey of potential home purchasers showed that over 50% agreed it would occur this year. The economy, however, remained strong in the fourth quarter, and that has caused many to rethink the possibility. For example, Goldman Sachs, in their 2020 U.S. Outlook, explained: “Markets sounded the recession alarm this year, and the average forecaster now sees a 33% chance of recession over the next year. In contrast, our new recession model suggests just a 20% probability.

Despite the record age of the expansion, the usual late-cycle problems—inflationary overheating and financial imbalances—do not look threatening.” What are experts saying we’ll likely see in 2020? Danielle Hale, Chief Economist at realtor.com says: “I think the biggest surprise from the forecast is how long the market is staying in this low inventory environment, especially as Millennials are in a major home-buying phase…sellers will contend with flattening price growth and slowing activity with existing home sales down 1.8%. Nationwide you can look to flat home prices with an increase of less than 1%.”

Mike Fratantoni, Chief Economist at Mortgage Banker Association (MBA) says: “Interest rates will, on average, remain lower…These lower rates will in turn support both purchase and refinance origination volume in 2020.” and Skylar Olsen, Director of Economic Research at Zillow says: “If current trends hold, then slower means healthier and smaller means more affordable. Yes, we expect a slower market than we’ve become accustomed to the last few years…consumers will continue to absorb available inventory and the market will remain competitive in much of the country.” Bottom line, Mortgage rates are projected to remain under 4%, causing sales to increase in 2020. With growing demand and a limited supply of inventory, prices will continue to appreciate, while the threat of an impending recession seems to be softening. It looks like 2020 may be a solid year for the real estate market.

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