Is the Real Estate Market Going to Crash?

/in , , /by

While many areas of the economy have contracted, the housing market has stayed remarkably strong. But can the good news last?

When COVID-related shutdowns began back in March, real estate brokers and clients scrambled to respond to the shift. Record-low interest rates caused some lenders to call a halt to new underwriting, and homeowners debated whether or not to put their houses on the market. However, those first days of uncertainty ushered in a period of unprecedented demand in the U.S. real estate market, which ended the year with increasing average home prices (up 13.4% from the previous year) and shrinking days on market (13 fewer than in 2019).1

Now, as the spring market approaches, you may be wondering whether the good times can continue to roll on. If you’re a homeowner, should you take advantage of this opportunity? If you’re a buyer, should you jump in and risk paying too much? Below I answer some of your most pressing questions.

 

How is today’s market different from the one that caused the 2008 meltdown?

At the beginning of the pandemic, fears of an economic recession and an ensuing mortgage meltdown were top of mind for homeowners all across the country. For many buyers and sellers, the two seemed to go hand in hand, just as they did in the 2008 economic crisis.

In reality, however, the conditions that led to 2008’s recession were very different from those that triggered the current downturn—and this time, the housing market is the source of much of the good news.2 This is in line with historical patterns, as housing prices traditionally hold steady in the face of recession, with homeowners staying put and investors putting their money into bricks and mortar to ride out uncertainty in the stock market. 

This time around, because of lessons learned in 2008, banks are better funded, homeowners are holding more accrued equity, and, crucially, much of the economic activity is focused on financial factors outside the housing market. As many industries quickly pivoted to work-from-home, early fears of widespread job loss-related foreclosures have failed to materialize. Federal stimulus payments and the Paycheck Protection Program also helped to offset some of the worst early effects of the shutdown.

 

Are we facing a real estate bubble?

A real estate bubble can occur when there is a rapid and unjustified increase in housing prices, often triggered by speculation from investors. Because the bubble is (in a sense) filled with “hot air,” it pops—and a swift drop in value occurs. This leads to reduced equity or, in some cases, negative equity conditions.

By contrast, the current rise in home prices is based on the predictable results of historically low-interest rates and widespread low inventory. Basically, the principle of supply and demand is working just as it’s supposed to do. In addition, experts predict a strong seller’s market throughout 2021 along with increases in new construction.3 This should allow supply to gradually rise and fulfill demand, slowing the rate of inflation for home values and offering a gentle correction where needed.

Effects of low-interest rates

According to Freddie Mac, rates are projected to continue at their current low levels throughout 2021.4 This contributes to home affordability even in markets where homes might otherwise be considered overpriced. These low-interest rates should keep the market lively and moving forward for the foreseeable future.

Effects of low inventory

Continuing low inventory is another reason for higher-than-average home prices in many markets.5 This should gradually ease as an aggressive vaccination rollout and continuing buyer demand drive more homeowners to move forward with long-delayed sales plans and as new home construction increases to meet demand.6

 

Aren’t some markets and sectors looking particularly weak?

One of the big stories of 2020 was a mass exodus from attached home communities and high-priced urban areas as both young professionals and families fled to the larger square footage and wide-open spaces of suburban and rural markets. This trend was reinforced by work-from-home policies that became permanent at some of the country’s biggest companies.

Speculation then turned to the death of cities and the end of the condo market. However, it appears that rumors of the demise of these two residential sectors have been greatly exaggerated. 

With the first vaccine rollouts, renters have begun returning to major urban centers, attracted by the sudden rise in available inventory and newly discounted rental rates.7 In addition, buyers who were previously laser-focused on a single-family home responded to tight inventory by taking a second look at condos.8 While nationwide condo prices continue to lag behind those of detached homes, they’ve still seen significant price increases and days on market reductions year over year.

In addition to these improvements, the 2020 migration has spread the economic wealth to distant suburban and rural enclaves that normally don’t benefit from increases in home values or an influx of new investment. As many of these new residents set up housekeeping in their rural retreats, they’ll revitalize the economies of their adopted communities for years to come.

 

How has COVID affected the “seasonal” real estate market?

Frequently, the real estate market is seen as a seasonal phenomenon. However, the widespread shutdowns in March 2020, coming right at the beginning of the market’s growth cycle in many areas, has led to a protracted, seemingly endless “hot spring market.”

While Fannie Mae’s chief economist Douglas Duncan predicts slower growth from 2020’s historic numbers, the outlook overall is positive as we embark on the 2021 spring selling cycle.9 Duncan anticipates an additional lift in the second half of 2021 as buyers return to business as usual and look to put some of their pandemic savings to work for a down payment. Thus, we could be looking at another longer-than-usual, white-hot real estate market.

 

How will a Biden administration affect the real estate market?

Projected policy around housing promises to be a boost to the real estate market in many cases.10 While some real estate investors bemoan proposed changes to 1031 Exchanges, the Biden plan for a $15,000 first-time homebuyer tax credit aims to increase affordability and bring eager new home buyers into the market. In addition, Biden-proposed policy pinpoints low inventory as a primary driver of unsustainable home values and is geared toward more affordability through investments in construction and refurbishment.

Overall, according to most indicators, the real estate news looks overwhelmingly positive throughout the rest of 2021 and possibly beyond. Pent-up demand and consumer-driven policies, along with a continued low-interest-rate environment and rising inventory, should help homeowners hold on to their increased equity without throwing the market out of balance. In addition, the increase in long-term work-from-home policies promises to give a boost to a wide variety of markets, both now and in the years to come.  

 

STILL HAVE QUESTIONS? I HAVE ANSWERS

While economic indicators and trends are national, real estate is local. I’m here to answer your questions and help you understand what’s happening in your neighborhood. Reach out to learn how these larger movements affect our local market and your home’s value. 

 

Sources:

  1. Realtor.com –
    https://www.realtor.com/research/december-2020-data/
  2. New York Magazine –
    https://nymag.com/intelligencer/2020/06/why-this-economic-crisis-wont-be-as-bad-as-2008.html
  3. Washington Post –
    https://www.washingtonpost.com/business/2021/01/11/2021-housing-market-predictions/
  4. Freddie Mac –
    http://www.freddiemac.com/research/forecast/20210114_quarterly_economic_forecast.page?
  5. Wall Street Journal –
    https://www.wsj.com/articles/housing-market-stays-tight-as-homeowners-stay-put-11611226802?mod=re_lead_pos1
  6. Marketwatch –
    https://www.marketwatch.com/story/new-home-construction-activity-soars-to-highest-level-in-over-a-decade-as-builders-rush-to-produce-single-family-homes-2021-01-21
  7. Forbes –
    https://www.forbes.com/sites/noahkirsch/2021/01/14/signs-of-a-rebound-new-york-city-rent-prices-are-climbing-back
  8. Washington Post –
    https://www.washingtonpost.com/business/2021/01/07/condo-sales-rebound-amid-dwindling-inventory-houses/
  9. Mortgage Professional America –
    https://www.mpamag.com/news/fannie-mae-chief-economists-forecast-for-us-economy-housing-market-in-2021-244045.aspx
  10. Inman –
    https://www.inman.com/2020/11/09/what-a-joe-biden-presidency-means-for-real-estate-and-housing/

5 Inspiring Home Design and Remodeling Trends for 2021

/in , , , /by

We’ve all spent a lot more time at home over the past year. And for many of us, our homes have become our office, our classroom, our gym—and most importantly, our safe haven during times of uncertainty. So it’s no surprise to see that design trends for 2021 revolve around soothing color palettes, cozy character, and quiet retreats.

Even if you don’t have immediate plans to buy or sell your home, I advise my clients to be mindful of modern design preferences when planning a remodel or even redecorating. Over-personalized or unpopular renovations could lower your property’s value. And selecting out-of-style fixtures and finishes could cause your home to feel dated quickly.

To help inspire your design projects this year, I’ve rounded up five of the hottest trends. Keep in mind, not all of these will work well in every house. If you plan to buy, list, or renovate your property, give me a call. I can help you realize your vision and maximize the impact of your investment.

1. Uplifting Colors

Colors are gravitating toward warm and happy shades that convey a sense of coziness, comfort, and wellbeing. This year’s palettes draw from earthy hues, warm neutrals, and soothing blues and greens.1

While white and gray are still safe options, expect to see alternative neutrals become increasingly popular choices for walls, cabinets, and furnishings in 2021. For a fresh and sophisticated look, try one of these 2021 paint colors of the year:

  • Aegean Teal (coastal blue) by Benjamin Moore
  • Urbane Bronze (brownish-gray) by Sherwin-Williams
  • Soft Candlelight (muted yellow) by Valspar

On the opposite end of the spectrum, indigo, ruby, sapphire, and plum are showing up on everything from fireplace mantels and floating shelves to fabrics and home accessories. These classic, rich hues can help bring warmth, depth, and a touch of luxury to your living space.

To incorporate these colors, designers recommend using the “60-30-10 Rule.” Basically, choose a dominant color to cover 60% of your room. For example, your walls, rugs, and sofa might all be varying shades of beige or gray. Then layer in a secondary color for 30% of the room. This might include draperies and accent furniture. Finally, select an accent color for 10% of your room, which can be showcased through artwork and accessories.2

 

2. Curated Collections

After a decade of minimalism, there’s been a shift towards highly-decorative and personalized interiors that incorporate more color, texture, and character. Clearly-defined styles (e.g., mid-century modern, industrial, modern farmhouse) are being replaced by a curated look, with furnishings, fixtures, and accessories that appear to have been collected over time.3

This trend has extended to the kitchen, where atmosphere has become as important as functionality. The ubiquitous all-white kitchen is fading in popularity as homeowners opt for unique touches that help individualize their space. If you’re planning a kitchen remodel, consider mixing in other neutrals—like gray, black, and light wood—for a more custom, pieced-together look. And instead of a subway tile backsplash, check out zellige tile (i.e., handmade, square Moroccan tiles) for a modern alternative with old-world flair.4

 

3. Reimagined Living Spaces

The pandemic forced many of us to rethink our home design. From multipurpose rooms to converted closets to backyard cottages, we’ve had to find creative ways to manage virtual meetings and school. And designers expect these changes to impact the way we live and work for years to come.

For example, some home builders are predicting the end of open-concept floor plans as we know them.5 Instead, buyers are searching for cozier spaces with more separation and privacy. Cue the addition of alcoves, pocket doors, and sliding partitions that enable homeowners to section off rooms as needed.4

The necessity of a home office space is also here to stay. But what if you don’t have a dedicated room? Alternative workspaces have become increasingly popular. In fact, one of the biggest trends on Pinterest this year is the “cloffice”—essentially a spare closet turned home office. Searches for “home library design” and “bookshelf room divider” are on the rise, as well.6

 

4. Staycation-Worthy Retreats

With travel options limited right now, more homeowners are turning their vacation budgets into staycation budgets. Essentially, recreate the resort experience at home—and enjoy it 365 days a year!

Bedrooms should provide a soothing sanctuary for rest and relaxation. But this year, minimalist décor and muted colors are giving way to bolder statement pieces. To create a “boutique hotel” look in your own bedroom, start with a large, upholstered headboard in a rich color or pattern. Layer on organic linen bedding and a chunky wool throw, then complete the look with a pair of matching bedside wall lights.7

Carry those vacation-vibes into your bathroom with some of the top luxury upgrades for 2021. Curbless showers and freestanding tubs continue to be popular choices that offer a modern and spacious feel, and large-format shower tiles with minimal grout lines make clean up a breeze. Add a floating vanity and aromatherapy shower head for the ultimate spa-like experience.4

 

5. Outdoor Upgrades

From exercise to gardening to safer options for entertaining, the pandemic has led homeowners to utilize their outdoor spaces more than ever. In fact, backyard swimming pool sales skyrocketed in 2020, with many installers reporting unprecedented demand.8 But a new pool isn’t the only way homeowners can elevate their outdoor areas this year.

The home design website Houzz recently named 2021 “the year of the pergola.” They’re a relatively quick and affordable option to add shade and ambiance to your backyard.4 Another hot trend? Decked-out, custom playgrounds for exercising (and occupying) the youngest family members who may be missing out on school and extracurricular activities.9

But don’t limit your budget to the backyard. Landscapers are reporting an increase in front yard enhancements, including porch additions and expanded seating options. These “social front yards” enable neighbors to stay connected while observing social-distancing guidelines.10

 

DESIGNED TO SELL

Are you contemplating a remodel? Want to find out how upgrades could impact the value of your home? Buyer preferences vary greatly by neighborhood and price range. I can share my insights and offer tips on how to maximize the return on your investment. And if you’re in the market to sell, I can run a Comparative Market Analysis on your home to find out how it compares to others in the area. Contact me to schedule a free consultation!

 

Sources:

  1. Good Housekeeping –
    https://www.goodhousekeeping.com/home/decorating-ideas/g34762178/home-decor-trends-2021/
  2. The Spruce –
    https://www.thespruce.com/timeless-color-rule-797859
  3. Homes & Gardens –
    https://www.homesandgardens.com/news/interior-design-trends-2021
  4. Houzz –
    https://www.houzz.com/magazine/36-home-design-trends-ready-for-takeoff-in-2021-stsetivw-vs~142229851
  5. Zillow –
    https://www.prnewswire.com/news-releases/the-end-of-open-floor-plans-how-homes-will-look-different-after-coronavirus-301080662.html
  6. Pinterest –
    https://business.pinterest.com/content/pinterest-predicts/more-door/
  7. Homes & Gardens –
    https://www.homesandgardens.com/spaces/decorating/bedroom-trends-224944
  8. Reuters –
    https://www.reuters.com/article/us-health-coronavirus-pools/pool-sales-skyrocket-as-consumers-splash-out-on-coronavirus-cocoons-idUSKCN2520HW
  9. Realtor.com –
    https://www.realtor.com/advice/home-improvement/2021-design-trends/
  10. Realtor Magazine –
    https://magazine.realtor/daily-news/2020/12/09/4-outdoor-home-trends-that-may-gain-steam-in-2021

The New Normal: A Strong Housing Market Expected to Continue into 2021

/in , , /by

“2020 will be known for a lot of things, and a record-breaking year for real estate will certainly be one of its more unexpected legacies,” prominent economist Daryl Fairweather said.1 And he’s right: most of us would have expected the housing market to suffer from circumstances like a once-in-a-hundred-years pandemic and historic inventory shortages. 

But, rather than a slowdown, we are continuing to experience a surprisingly robust real estate market across the country. And experts estimate that these conditions are likely to last well into the new year. Fannie Mae Senior VP and Chief Economist Doug Duncan predicts that existing home sales will ultimately “be up a percent or more in 2021.” He believes home prices will continue to rise due to limited inventory, but he is confident the Federal Reserve will keep interest rates low into the future, which will be “very good for households.”2

Market conditions like fewer available listings, changing criteria for desired homes, and record-low mortgage rates are changing the way people buy and sell homes, most likely in a lasting way. But this sustained activity, even in the uncertainty that is 2020, proves that our country still views real estate as a sound investment. The only question now is how you can take advantage of the housing market’s “new normal.” 

 

FEWER LISTINGS EQUALS A SELLER’S MARKET

Inventory, meaning the number of homes for sale, is at a record low across the country. The National Association of Realtors (NAR) reports there are fewer homes on the market today than the association has seen in data going all the way back to 1982.3 Currently, the total housing inventory is about 1.47 million units, which is a decline of 19.2% from one year ago.4

Experts do predict some relief on the horizon. MarketWatch had previously anticipated housing starts would occur at a pace of 1.45 million and building permits would come in at a pace of 1.52 million.5 But it turns out that the market exceeded expectations: compared with last year, housing starts are up 11% and permitting for new homes occurred at a seasonally-adjusted annual rate of 1.55 million. That represents a 5% increase from August and an 8% increase from a year ago.

For now, the fact that there are fewer listings creates an advantageous housing market for sellers. There are several reasons why. 

For one, buyers have to act fast to snap up available homes. As a result, most properties that come on the market stay for an average of just 21 days before they are sold.6 “That is the fastest ever recorded in our monthly series,” says NAR Chief Economist Lawrence Yun.

Another benefit is that sellers are enjoying higher net returns on their listings. This is thanks to the tough competition for homes, which often results in bidding wars between buyers. Nationwide, the median home price in September rose to $311,800. That translates to about $40,000 (15%) more than just a year ago.7 

This seller’s market is not simply a product of the pandemic. In fact, in the country’s top 100 metro markets, inventory has been dwindling since the first quarter of 2020.8 This means that even with increased construction, buyers can’t simply wait for things to go back to normal before reentering the market. Rather, all signs indicate that this is the new normal.

What It Means for Homeowners: 

These higher home prices show that buyers are willing to spend more on a home right now than they did last year. So, if there ever were a time to list for top dollar—and expect to receive asking price quickly—that time is now. Ask us for a free consultation of your home’s value today.

What It Means for Homebuyers:

Due to low inventory, buyers could easily find themselves in a bidding war. Time is of the essence in a seller’s market, so you’ll need to get your financing in order and be preapproved for a loan before you begin your home search. We can connect you with a trusted mortgage professional to get you started.

 

BUYERS BENEFIT FROM LOW MORTGAGE RATES AND A BIGGER PLAYING FIELD

Don’t worry, homebuyers. This “new normal” of real estate has benefits for you too. 

For example, people used to base their next home purchase on how far the commute was to work or in which public school district it was. But now, thanks to the pandemic shifting the locus of jobs and work, they are free to consider what they need from a home to make it a place they truly want to be in as they work, teach, exercise, cook, and live.

Often, this equates to needing more space in different types of areas. Realtor.com consumer surveys show that people are desiring quieter neighborhoods, home offices, updated kitchens, and access to the great outdoors.9 The search for these criteria is driving residents out of densely populated metropolitan areas and into the suburbs.10 And this exodus from cities is good news for buyers: it opens up more possibilities for inventory that they could not have considered pre-pandemic. 

Another advantage for buyers is the record-low mortgage rates. The average rate for a 30-year fixed-rate mortgage hit a record low in mid-October when rates fell to 2.81%. That’s the lowest since Freddie Mac began conducting the survey in 1971 and well below last year’s 3.69%.11 Similarly, a 15-year fixed-rate mortgage can be had for as low as 2.35% compared to 3.15% a year ago.

Thanks to these rates, buyers are afforded the opportunity to buy nearly $32,000 more home than they could one year ago, while keeping their monthly payment the same.12 So even though home prices are high now, it is currently more affordable to buy a home now than it was last year.

If you want to take advantage of these rock-bottom mortgage rates, you need to act fast. Though rates are projected to stay low, housing economists predict that the window of opportunity to get the best rate could be closing in the coming months. Mike Fratantoni, chief economist at the Mortgage Bankers Association, said he expects the average rate on a 30-year mortgage to rise to 3.5% by the end of 2021.13

What It Means for Homeowners:

Record-low mortgage rates offer you the opportunity to lower your monthly payment—or even take out some equity—with a refinance. With those additional funds, you could even choose to invest in a second home in a new desirable location. Reach out to us for a referral to a trusted mortgage professional or an agent in those markets. 

What It Means for Homebuyers:

The time is now to determine how much home you can comfortably afford and make a plan to find it. We can set up a search for you to find homes that best meet your new needs, even if they’re in neighborhoods you wouldn’t have considered before.

 

A RECORD-SETTING YEAR FOR HOME SALES IS JUST THE BEGINNING

Despite the seemingly adverse buyer conditions, 2020 experienced a 14-year high number of home sales, NAR reports. Existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops, rose 9.4% in September to a seasonally adjusted annual rate of 6.54 million.14 That’s a 21% increase from a year ago! 

Every region of the country has seen a surge in sales activity. According to George Ratiu, senior economist for Realtor.com, part of the reason for these continued sales is that the pandemic has created a paradigm shift in the patterns of real estate.15 For example, housing needs are typically resolved by late summer and early fall to coincide with the commencement of the new school year. With homeschooling and remote work, however, buyers have been freed to continue their home search into the traditionally slow winter months.

Another reason for the robust market is that Millennials are finally putting their money into homeownership. According to the U.S. Census Bureau, the homeownership rate for 25-to-34-year-olds rose to 40.7% by the end of last year.16 This is significant because Millennials, the generation of people in their mid-20s to late-30s, currently surpasses Baby Boomers as the nation’s largest living adult generation. As the remaining percentage of this group starts investing in homes in the near future, demand will persist.

All of these factors indicate that the housing market is poised to remain strong as we head into the new year. And as Jonathan Woloshin, head of U.S. real estate at UBS Global Wealth Management, believes, they could “buoy the housing market for years to come.”17

What It Means for Homeowners:

It’s tempting to believe that homes will basically sell themselves in a market like this. But we’re still seeing properties that are overpriced and under-marketed sit unsold. We can help you optimize the process of selling your home so you can get the best possible offer.

What It Means for Homebuyers:

Preparation is key to success in a seller’s market like this, but don’t let yourself become paralyzed. We are here to answer your questions and offer sound advice to guide you through all the options that are available to you.

 

REAL ESTATE IS A SAFE BET

Your other investments might have been on roller coasters this year, but the real estate market has been steady, competitive, and strong throughout. That makes it a good choice for your financial future.

National real estate numbers can give us a pulse on the market, but real estate happens in our own backyard. As your local market experts, I can help you understand the finer points of the market that impact sales and home values in your own neighborhood. 

If you’re considering buying or selling a home before the new year or in early 2021, contact me now to schedule a free consultation. I’ll work with you to develop an actionable plan to meet your goals.

 

Sources:

  1. Redfin – 
    https://www.redfin.com/news/housing-market-news-september-2020/
  2. Housing Wire –
    https://www.housingwire.com/articles/fannie-maes-doug-duncan-offers-his-predictions-for-2021/
  3. CNBC –
    https://www.cnbc.com/2020/10/22/september-existing-home-sales-jump-9point5percent.html
  4. NAHB –
    http://eyeonhousing.org/2020/10/existing-home-sales-surge-despite-record-low-supply
  5. MarketWatch –
    https://www.marketwatch.com/story/new-home-construction-slows-slightly-in-august-driven-by-pullback-in-multifamily-starts-2020-09-17
  6. National Association of Realtors –
    https://www.nar.realtor/newsroom/existing-home-sales-soar-9-4-to-6-5-million-in-september
  7. Business Insider –
    https://www.businessinsider.com/how-2020-broke-the-housing-market-inventory-could-run-out-2020-9
  8. Forbes –
    https://www.forbes.com/sites/petertaylor/2020/10/11/covid-19-has-changed-the-housing-market-forever-heres-where-americans-are-moving-and-why/#74e7355761fe
  9. Realtor.com –
    https://www.realtor.com/research/top-consumer-home-features-coronavirus/ 
  10. Wealth Advisor –
    https://www.thewealthadvisor.com/article/covid-19-has-changed-housing-market-forever-heres-where-americans-are-moving-and-why
  11. Washington Post – 
    https://www.washingtonpost.com/business/2020/10/15/30-year-mortgage-rate-drops-record-low/
  12. Forbes – 
    https://www.forbes.com/advisor/mortgages/buying-a-home-low-mortgage-rates/
  13. BankRate – 
    https://www.bankrate.com/mortgages/refinance-window-could-close-soon/
  14. National Association of Realtors – 
    https://www.nar.realtor/newsroom/existing-home-sales-soar-9-4-to-6-5-million-in-september
  15. Forbes –
    https://www.forbes.com/sites/petertaylor/2020/10/11/covid-19-has-changed-the-housing-market-forever-heres-where-americans-are-moving-and-why/#74e7355761fe
  16. TD Economics – 
    https://economics.td.com/us-falling-mortgage#:~:text=The%20homeownership%20rate%20among%20millennials,47.7%25%20at%20a%20comparable%20age.&text=This%20means%20that%201.4%20million,that%20of%20the%20older%20generation
  17. Axios Media – 
    https://www.axios.com/real-estate-market-819e3c85-3765-4014-91c0-b545be6d5935.html

2020 Outlook: Real Estate Market Forecast

/in , /by

We’re in the midst of the longest economic
expansion in U.S. history, and economists think there’s still room to grow. A
recent survey by the National Association for Business Economics found that
experts believe the U.S. economy will remain positive throughout 2020.[1]

Still, given that recessions are a natural
(and necessary) part of a business cycle, we know this period of growth will
inevitably end. So you may be wondering … how will an eventual recession impact
the real estate market?

Many Americans assume a recession would lead
to a decline in housing prices like we saw during the Great Recession of 2008.
But the real estate market crash we experienced wasn’t typical. In fact, the
last recession wasn’t typical at all. It was the worst economic downturn since
the Great Depression of the 1930s.

ATTOM Data Solutions analyzed real estate
prices during the last five recessions and found that, in the majority of
cases, home prices actually went up. Only twice (in 1990 and 2008) did prices
decline, and in 1990 it was by less than one percent.[2]

So what can historical precedent—combined with
today’s data—tell us about the future of real estate? Here’s where experts
predict the housing market is headed in 2020 and beyond.

HOME
PRICES WILL KEEP RISING

Economists predict U.S. housing prices will continue
to rise, regardless of a recession. In fact, property data firm CoreLogic
forecasts a faster rate of growth for home prices in 2020 than we saw in 2019,
with the biggest gains at the lower end of the market.[3]

Arch MI Chief Economist Ralph DeFranco expects
entry-level home prices to increase faster than incomes this year, making it
even more difficult for many first-time buyers to afford to enter the
market.[4]

“Low interest rates and a shortage of starter
homes will continue to push up prices,” predicts DeFranco. “This is especially
the case for lower price points, since builders have tended to focus on more
expensive, higher-profit houses and less on replenishing low inventories of
entry-level homes.”[4]

“Real estate is on firm ground with little
chance of price declines,” said National Association of Realtors Chief
Economist Lawrence Yun. “However, in order for the market to be healthier,
more supply is needed to assure home prices as well as rents do not
consistently outgrow income gains.”[5]

What
does it mean for you? If you have the ability and
desire to buy a home now, don’t let a fear of recession or falling prices hold
you in limbo. Economists expect home values, as well as rent prices, to
continue rising. So you’ll likely pay more the longer you wait.

INVENTORY
CONSTRAINTS WILL CONTINUE

According to Redfin, Americans are staying in
their homes longer. In 2019, the average homeowner had resided in their home
for 13 years, up from just eight years in 2010. That means there are fewer
homes available today for those who want to buy.[6]

It’s possible that an increase in new
construction could offer some relief. The National Association of Realtors
(NAR) expects single-family housing starts to total one million this year, the
highest level since 2007. And NAR Chief Economist Lawrence Yun predicts the
average price of new construction will decline slightly as builders shift to
building smaller, more affordable homes.[7]

However, these efforts may not be enough to
meet current demand.“Despite improvements to new construction and
short waves of sellers, next year will once again fail to bring a solution to
the inventory shortage,” predicts Realtor.com Senior Economist George Ratiu.
“In 2020, we expect inventory to struggle to grow and could instead reach a
historic low level.”[8]

What
does it mean for you? If you’re looking to buy a
starter home, be prepared to compete for the best listings. Start your search
early, and if you’re up against a deadline (like a new baby), build in plenty
of time to find the right home. We can help you assess your options, including
new construction and up-and-coming developments.

MORTGAGE
RATES WILL REMAIN LOW

Mortgage rates have declined more than a full
percentage point since November 2018, when they hit a recent peak of 4.94%.[9]The Mortgage Bankers Association predicts rates will remain low, at
around 3.7%, through mid-2021.[10]

While it may not seem significant, on a
$200,000 30-year fixed-rate mortgage, that lower rate means buyers could save
around $145 on their monthly payment and more than $52,000 over the life of
their mortgage. Lower mortgage rates make homeownership more accessible and
affordable for buyers.

Although economists expect mortgage rates to
stay low, they caution against waiting to act. Economic factors, shifts in
supply and demand, or unforeseen impacts of the November election could cause
rates to rise unexpectedly. “We recommend borrowers with long-term plans of
staying in their homes to lock in a low rate now because there’s no telling how
long these low rates will last,” warns Preetam Purohit, a capital markets
trader at Embrace Home Loans.[11]

What
does it mean for you? If you’re looking to buy a home,
act soon to lock in a historically low mortgage rate. It will minimize your
monthly payment and could save you a bundle over the long term. And if you plan
to stay in your current home for a while, consider whether it makes sense to refinance
your mortgage at today’s lower rates.

MILLENNIALS
WILL DRIVE THE MARKET

Millennials are expected to account for more
than half of all mortgages this year, outnumbering Generation X and Baby
Boomers combined. It’s not surprising, considering their age and stage of life.
In 2020, the largest cohort of millennials will turn 30, and the oldest
millennials will turn 39.[8]

“Family changes tend to drive home-buying
decisions,” explains Realtor.com Chief Economist Danielle Hale.
“Millennials are going to be active in the housing market not just because
they’re just at the age when they’re thinking about becoming first-time home
buyers, but they’re also in the age range when they’re having kids.”[12]

Younger millennials flocked to urban centers
that offered easy access to work, shopping, and restaurants. But high prices,
lack of square footage, and subpar schools are driving millennials out to the
suburbs as they begin to marry and expand their families.

In response, a new model for suburban living
has emerged. “Hipsturbias,” or mixed-use communities that bring the
live/work/play concept to the suburbs, were recently named one of the top real
estate trends for 2020 by the Urban Land Institute.[4]

What does it mean for you? If
you’re a millennial who has been priced out of urban living or is looking for
more space for your growing family, a number of suburbs in our area have a lot
to offer. We can point you towards the communities that will best meet your
needs. And if you’re a homeowner with plans to sell, give us a call. We know
how to market your home to millennials … and can help you sell quickly for top
dollar by appealing to this leading market segment!

WE’RE
HERE TO GUIDE YOU

While national real estate numbers can provide
a “big picture” outlook, real estate is local. As local market experts, we can
guide you through the ins and outs of our market and the issues most likely to
impact sales and home values in your particular neighborhood.

If you’re considering buying or selling a home
in 2020, contact us now to schedule a free consultation. We’ll work with you to
develop an action plan to meet your real estate goals this year.

Sources:

Why You Should Be Excited About the Housing Market

/in , , /by

What an amazing year 2016 was for home sellers, and 2017 promises to be even better. By December of 2015, with 5.26 million sales, we had seen a more robust housing market than we’ve seen since 2006. In fact, as of early 2016, America’s housing market had spent 43 consecutive months as a seller’s market. Lawrence Yun, the National Association of REALTORS (NAR) chief economist chalks up the heavy sales volume to “the prospect of higher mortgage rates in coming months and warm November and December weather.”

Get Very Excited if You Plan to Sell Your Home This Year

The combination of high demand for homes and shrinking inventories produces a seller’s market and typically signals rising home prices. While many forecasters expect home prices to continue rising this year, they caution that they won’t climb as quickly or as much as they did last year. “The NAR is calling for a 4.4 percent increase in existing home prices this year and 3.4 percent in 2017; other economists and strategists also put 2016 price growth in the 4 percent to 5 percent range,” claims NAR’s Adam DeSanctis.
In addition, inventories of available homes rose slightly last month. Whether or not this signals a trend toward a more balanced housing market remains to be seen. So, yes – although it sounds trite – the best time to sell your home is right now, while inventory is still low. If you will be selling a home priced in the low-to-middle price tier for your market, expect it to go quickly and for top dollar. You will have little competition and the demand in this price range is strong, according to Shu Chen of CoreLogic.

While this type of market makes it easy for home sellers to become complacent, if you expect to get top dollar for your home and want it to sell quickly, do the work required to ensure that it’s in move-in condition.

Buying a Home This Year?

While it may seem like there isn’t a whole lot for homebuyers to get excited about this year, there is one bonus for you: low interest rates. In fact, according to Freddie Mac’s Primary Mortgage Market Survey, 30-year mortgage rates fell in April 2016 to an average of 3.59 percent across the country, down from 3.65 percent the same time last year.

Combine the low rates with more relaxed lending guidelines and there is definitely good news for the 2016 homebuyer. Lower mortgage rates mean a lower monthly payment, which means you have more purchasing power, and that additional power can “mean the difference between buying a 2-bedroom home versus a 3-bedroom one; between buying a home with large closets versus small closets; and, between buying an upgraded home versus a dated one,” according to Dan Green at The Mortgage Reports.

Another reason to get excited: It appears that those deep-pocketed investors who pay all cash for homes have left the market. Last year, 33.9 percent of all home sales were to cash buyers, the lowest rate since 2008, according to Molly Boesel with CoreLogic. While there is still plenty of competition out there from other homebuyers for homes in good locations and in decent condition, the playing field is a bit more level.

Yes, there is still a lot of competition from other homebuyers. This makes it more important than ever to have all your ducks in a row before making an offer on a property. Ensure you know exactly how much you can spend and that you’ve obtained a preapproval letter from your lender. Make your offer stand out from the others by keeping it lean and mean, with the shortest time periods for contingencies as possible. While we’re still in a seller’s market, come in with your highest and best offer. The market moves too quickly right now to assume the seller will negotiate over price.

Finally, if you’ve been sitting on the fence waiting for prices to come down, jump off. Home prices are currently rising twice as quickly as incomes, and it doesn’t appear the situation will change in the near future.