Realtor.com released it’s 2020 Housing Market Predictions this week. Here the key takeaways from the national housing market forecast that US real estate investors should know.
US Economic Outlook 2020
2019 saw overall positive economic activity, although it seemed to slow down in growth in the second and third quarters of the year. GDP saw a 4.1% annualized gain in quarter one, a 2% gain in quarter two, and a 2.1% gain in quarter three.
2020 will be marked by the same mild growth in GDP. The economic forecast is for a 1.7% gain. This will likely be due to the continuing rise in housing costs which will force consumer spending to wane when it comes to non-housing spending.
Resulting in a kind of domino effect, Realtor.com reports that the decrease in consumer spending combined with “rising global uncertainty and market volatility” will ultimately lead to an increase in the unemployment rate from 3.6% to 3.9% by the end of 2020 as companies work to reduce costs. This will be accompanied by a drop in consumer confidence. The forecast for the Conference Board’s Consumer Confidence Index is a drop of 21%.
2019 saw multiple Federal Reserve cuts to the interest rates in response to global conditions. As a result, inflation is expected to be moderate, with predictions putting it at a 2% year-over-year increase for 2020. With this, mortgage rates are not expected to see major fluctuations throughout the year. In 2020, the average 30-year fixed mortgage rate is expected to be 3.85%.
Related: Investment Property Mortgage Rates in 2020: All You Need to Know
US Real Estate Trends 2020
1. US Housing Inventory May Reach Historic Lows in 2020
At the beginning of 2019, 2 out of 3 real estate markets witnessed housing inventory growth due to a national affordability issue which was pricing most buyers out of major markets.
Later in the year, as mortgage rates dropped, more buyers were able to enter the real estate market, buying homes with loans. This resulted in a year-end housing shortage, with only 1 out of 10 real estate markets seeing inventory growth.
The 2020 US housing market forecast shows that real estate inventory will still be a major issue for buyers. There will likely be a 1% to 5% year-over-year decrease throughout 2020. Even though there will be new construction and sellers will continue to enter the market, housing inventory will not see major growth next year.
2. Demand for Housing Will Be High, Driven by Millennial Home Buyers
Demand from buyers saw a rise in the middle of 2019 thanks to low mortgage rates, increasing rents, and a rise in Millennial home buyers. However, as we approach the end of the year, demand has somewhat dropped.
However, the US housing market 2020 will see strong demand from buyers. Millennials have become the major share of the market and reached a home-buying age of 30 in 2019. They will account for more than half of mortgage loans next year. At the same time, however, demand from Gen X and Baby Boomers will decrease.
Real estate investors should take advantage of this aspect of the housing market forecast. Buying investment property in locations with high demand from Millennial home buyers (and in their price range) could mean a quick sale and a good return on investment.
3. Home Sales Will See a Slight Drop as Home Prices Continue to Rise
Existing home sales fell in 2018 due to the affordable housing inventory shortage. 2019, however, saw a rise with the drop in mortgage rates.
As economic activity is expected to wane in 2020, housing inventory to decline, and price growth to continue, the housing market forecast 2020 shows a drop in existing home sales by 1.8% in 2020.
Even so, as entry-level demand is predicted to remain robust, home price growth will continue with a small increase of 0.8%.
4. Demand for Urban Centers Will Continue to Drop as Buyers Look Towards Affordable Mid-Sized Markets
As home prices continued to increase in 2019, major urban real estate markets such as New York, San Francisco, and Los Angeles actually saw drops in net migration. This is because more and more Millennial homebuyers are heading towards more affordable, smaller housing markets.
This housing market trend will continue in 2020. The US states that are forecast to see the most activity next year from buyers (both Millennials and Baby Boomers) looking for affordable options include:
- Arizona
- Nevada
- Texas
- North Carolina
- South Carolina
- Georgia
- Florida
As a real estate investor, this housing market forecast can work in your favor depending on your real estate investment strategy. If you want to buy an investment property and sell it quickly for a good return on investment, consider buying in one of the states listed above where you will be met with high demand. If you want to buy a rental property (one of the best real estate investment strategies), consider looking towards more expensive housing markets with larger populations of renters. Just be sure that the high price tag will not hinder your future cash flow.
2020 Housing Market Forecast for Buyers
First-time homebuyers will continue to find it difficult to enter the real estate market in 2020. For those investing in rental properties, this means a continuing high demand for rental homes from this population.
However, there will likely be an increase in inventory in the mid-price range. This is a welcome shift in the real estate market trends from 2019, which saw new homes mostly in the luxury market. The Midwest and the South will offer the best opportunities for buyers in 2020.
Related: 10 Best Places to Invest in Real Estate in 2020
2020 Housing Market Forecast for Sellers
Home sellers in the entry-level market will continue to see high demand and competition for their properties for sale. However, for sellers in the high-end, days on market will grow. Overall, property sellers will face flattening price growth and a drop in activity. To ensure you are able to sell, Realtor.com recommends that you adjust to real estate market conditions and think carefully about your asking pricing.
The Election and the 2020 US Real Estate Market
US presidential elections have an indirect effect on the housing market as shifts in favor of either party throughout can lead to uncertainty when it comes to future regulations and rules concerning real estate.
Consumer and business confidence and optimism will be affected as the population closely watches the US presidential election of 2020. This is likely to affect economic and housing market activity, but the housing market forecast for this is not clear.
US Housing Market Forecast 2020 by City
| Housing Market | Sales Growth | Price Growth |
| United States | -1.80% | 0.80% |
| Akron, Ohio | 2.60% | 0.00% |
| Albany-Schenectady-Troy, N.Y. | -0.50% | 2.30% |
| Albuquerque, N.M. | -0.20% | 0.90% |
| Allentown-Bethlehem-Easton, Pa.-N.J. | 2.30% | 0.40% |
| Atlanta-Sandy Springs-Roswell, Ga. | -3.50% | 4.50% |
| Augusta-Richmond County, Ga.-S.C. | -4.20% | 2.10% |
| Austin-Round Rock, Texas | -2.80% | -0.20% |
| Bakersfield, Calif. | -0.30% | -1.40% |
| Baltimore-Columbia-Towson, Md. | -0.10% | -0.30% |
| Baton Rouge, La. | -1.60% | 0.40% |
| Birmingham-Hoover, Ala. | -1.30% | -1.10% |
| Boise City, Idaho | 0.30% | 8.10% |
| Boston-Cambridge-Newton, Mass.-N.H. | -2.10% | 1.20% |
| Bridgeport-Stamford-Norwalk, Conn. | -4.10% | 4.80% |
| Buffalo-Cheektowaga-Niagara Falls, N.Y. | 2.60% | -2.20% |
| Cape Coral-Fort Myers, Fla. | 0.00% | 2.60% |
| Charleston-North Charleston, S.C. | 1.20% | 1.90% |
| Charlotte-Concord-Gastonia, N.C.-S.C. | 0.40% | 0.10% |
| Chattanooga, Tenn.-Ga. | 2.00% | 3.60% |
| Chicago-Naperville-Elgin, Ill.-Ind.-Wis. | -0.90% | -0.30% |
| Cincinnati, Ohio-Ky.-Ind. | 1.30% | 0.30% |
| Cleveland-Elyria, Ohio | 2.60% | 0.40% |
| Colorado Springs, Colo. | -1.40% | 6.30% |
| Columbia, S.C. | 5.50% | -0.20% |
| Columbus, Ohio | -2.00% | 1.70% |
| Dallas-Fort Worth-Arlington, Texas | -4.90% | -0.50% |
| Dayton, Ohio | 0.60% | -0.20% |
| Deltona-Daytona Beach-Ormond Beach, Fla. | 1.10% | 0.20% |
| Denver-Aurora-Lakewood, Colo. | -2.30% | 1.70% |
| Des Moines-West Des Moines, Iowa | -10.50% | 0.40% |
| Detroit-Warren-Dearborn, Mich | -4.10% | -1.00% |
| Durham-Chapel Hill, N.C. | -0.90% | 1.20% |
| El Paso, Texas | 0.90% | 0.60% |
| Fresno, Calif. | -0.70% | -0.90% |
| Grand Rapids-Wyoming, Mich | -4.20% | 0.20% |
| Greensboro-High Point, N.C. | 0.80% | -2.90% |
| Greenville-Anderson-Mauldin, S.C. | -2.50% | 0.10% |
| Harrisburg-Carlisle, Pa. | 0.30% | 0.50% |
| Hartford-West Hartford-East Hartford, Conn. | -3.00% | 2.70% |
| Houston-The Woodlands-Sugar Land, Texas | 0.30% | 0.20% |
| Indianapolis-Carmel-Anderson, Ind. | 0.00% | 1.10% |
| Jackson, Miss. | -2.10% | -0.10% |
| Jacksonville, Fla. | -2.30% | 0.70% |
| Kansas City, Mo.-Kan. | 3.40% | -4.00% |
| Knoxville, Tenn. | 1.60% | 1.30% |
| Lakeland-Winter Haven, Fla. | -0.90% | 0.20% |
| Las Vegas-Henderson-Paradise, Nev. | -9.50% | -1.10% |
| Little Rock-North Little Rock-Conway, Ark. | -2.60% | 1.00% |
| Los Angeles-Long Beach-Anaheim, Calif. | -6.00% | 0.70% |
| Louisville/Jefferson County, Ky.-Ind. | -0.80% | 0.90% |
| Madison, Wis. | -1.30% | 1.90% |
| McAllen-Edinburg-Mission, Texas | 4.40% | 4.00% |
| Memphis, Tenn.-Miss.-Ark. | 0.10% | 3.00% |
| Miami-Fort Lauderdale-West Palm Beach, Fla. | -1.10% | -1.20% |
| Milwaukee-Waukesha-West Allis, Wis. | -3.60% | 2.10% |
| Minneapolis-St. Paul-Bloomington, Minn.-Wis. | -2.40% | 2.80% |
| Nashville-Davidson–Murfreesboro–Franklin, Tenn. | -1.20% | 0.40% |
| New Haven-Milford, Conn. | 5.00% | -2.40% |
| New Orleans-Metairie, La. | -2.30% | -0.70% |
| New York-Newark-Jersey City, N.Y.-N.J.-Pa. | -4.10% | 0.70% |
| North Port-Sarasota-Bradenton, Fla. | 1.60% | 0.50% |
| Oklahoma City, Okla. | -1.40% | -0.80% |
| Omaha-Council Bluffs, Neb.-Iowa | -3.00% | 0.70% |
| Orlando-Kissimmee-Sanford, Fla. | 0.90% | 1.80% |
| Oxnard-Thousand Oaks-Ventura, Calif. | -6.00% | 0.10% |
| Palm Bay-Melbourne-Titusville, Fla. | -9.80% | 0.20% |
| Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md. | -3.90% | 0.80% |
| Phoenix-Mesa-Scottsdale, Ariz. | -0.40% | 3.40% |
| Pittsburgh, Pa. | -0.60% | 1.30% |
| Portland-South Portland, Maine | 1.40% | 1.20% |
| Portland-Vancouver-Hillsboro, Ore.-Wash. | -3.00% | 0.50% |
| Providence-Warwick, R.I.-Mass. | -2.10% | 0.20% |
| Raleigh, N.C. | 0.20% | 2.20% |
| Richmond, Va. | -7.70% | 0.60% |
| Riverside-San Bernardino-Ontario, Calif. | -7.60% | 1.50% |
| Rochester, N.Y. | 4.70% | 0.40% |
| Sacramento–Roseville–Arden-Arcade, Calif. | -6.10% | 0.80% |
| Salt Lake City, Utah | -0.50% | 3.50% |
| San Antonio-New Braunfels, Texas | -1.90% | 0.80% |
| San Diego-Carlsbad, Calif. | -3.20% | 0.20% |
| San Francisco-Oakland-Hayward, Calif. | -4.50% | -0.40% |
| San Jose-Sunnyvale-Santa Clara, Calif. | -3.00% | 2.10% |
| Scranton–Wilkes-Barre–Hazleton, Pa. | -2.70% | -3.20% |
| Seattle-Tacoma-Bellevue, Wash. | -0.80% | 3.10% |
| Spokane-Spokane Valley, Wash. | 1.50% | 1.30% |
| Springfield, Mass. | 0.30% | 1.10% |
| St. Louis, Mo.-Ill. | -1.20% | -0.60% |
| Stockton-Lodi, Calif. | 0.70% | -0.50% |
| Syracuse, N.Y. | -1.40% | 0.60% |
| Tampa-St. Petersburg-Clearwater, Fla. | 0.60% | 1.60% |
| Toledo, Ohio | 0.50% | -0.10% |
| Tucson, Ariz. | 3.40% | 3.30% |
| Tulsa, Okla. | 1.00% | -2.30% |
| Urban Honolulu, Hawaii | 3.60% | -0.90% |
| Virginia Beach-Norfolk-Newport News, Va.-N.C. | -3.80% | 1.10% |
| Washington-Arlington-Alexandria, DC-Va.-Md.-W. Va. | -1.50% | 2.60% |
| Wichita, Kan. | -0.50% | 1.10% |
| Winston-Salem, N.C. | 3.60% | 0.50% |
| Worcester, Mass.-Conn. | -0.40% | -0.60% |
| Youngstown-Warren-Boardman, Ohio-Pa. | -0.40% | 2.10% |
Read the full report here.
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