Welcome today we dive into the fascinating world of the U.S. housing market in 2020!
The topic captivates not only aspiring homeowners but also a wide range of experts, from economists to investors and analysts. They all keep a close eye on the latest trends to get a pulse on the economy's health and forecast America's future prosperity.
Grasping how the housing market works helps everyone involved make smarter choices, whether you're buying a home or putting money into a real estate company. This analysis will look at major trends to predict where the housing market went during 2020.
America's economy keeps growing, and that's good news!
How many people want new homes really depends on whether folks can afford them – basically, how much extra cash they have. Now, the big guns like the International Monetary Fund, the World Bank, and the Federal Reserve are saying that U.S. economic growth might slow down a bit in 2020 and going forward, compared to the last couple of years.
But here's the good part: they all agree that a recession isn't likely to hit us anytime soon, and the economy will still be on the up and up.
While real GDP growth is expected to slow, it should stay around 2% until 2022.
Personal income in the U.S. has been on the rise for the past six years, which is great news for the housing market! When people have more disposable income, they tend to buy more homes.
Disposable personal income in the United States
Source: Statista
Good news for the housing market in 2020! We're expecting a steady climb thanks to the economy chugging along nicely. The unemployment rate is super low right now, sitting at 3.6%, which means most folks are feeling pretty good after the 2008 financial crisis.
Interest rates will likely remain low, another positive sign
Mortgage rates are a big deal for whether people want to buy homes. When it's easier to get a loan, more Americans decide to buy instead of rent. Because of some global stuff that slowed down the U.S. economy in early 2019, the Fed cut rates three times last year, making it much cheaper to borrow money.
It's worth remembering that these cuts happened after four rate hikes in 2018, which had a lot of investors thinking higher rates would scare off homebuyers.
Interest rate hikes/cuts in 2018 and 2019
Source: The Federal Reserve
So, at their last meeting on December 11th, the Fed chair pretty much confirmed that interest rates would stay put in 2020 – no cuts or hikes planned.
The FOMC even put out a statement saying, "The Committee judges that the current stance of monetary policy is appropriate to support the sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective.”
This is great news for the U.S. housing market! Rates are already low, and with no hikes on the horizon but economic growth still happening, we're likely to see more demand for new homes.
You can even see this in the chart below, which shows how mortgage applications and the 30-year mortgage rate in the U.S. tend to move in opposite directions.
Source: YCharts
Mortgage originations are probably going to go up in 2020, which is exactly what the housing market needs to really take off.
House prices are going up – should we be worried?
Even though there's likely to be strong demand for houses for most of 2020, the increasing cost of buying a new home might scare off some buyers, just like it has in the past couple of years.
The S&P/Case-Shiller U.S. National Home Price Index is at an all-time high, which means home prices have been skyrocketing ever since they hit rock bottom during the financial crisis.
Source: Federal Reserve Bank of St. Louis
So, home prices are going up, and folks are wondering if we're heading for another housing bubble like a decade ago. But Dan North, the Chief Economist at Euler Hermes North America, doesn't think so.
He says houses are a bit overvalued, but not by a ton, and definitely not as much as before the bubble burst in 2005. Dan thinks there's a really low chance of a housing market crash in 2020. He figures strong market basics, like a growing economy, low unemployment, and good interest rates, will keep things moving forward this year.
Supply's tight, meaning more wins for home sellers in 2020
One big reason home prices have shot up over the last ten years is that there aren't enough homes to go around while more and more people want to buy. This trend is probably sticking around for the U.S. housing market in 2020, which means prices will likely keep climbing.
Looking at the chart, existing home sales really dropped in 2018 and didn't really pick up, even after a small rebound in early 2019. Since demand is still high, this pretty much tells us that buyers are having trouble finding homes that fit what they need and what they can afford.
U.S. existing home sales
Source: Trading Economics
For real estate companies focused on this segment, 2020 might be a tough year.
George Ratiu, a senior economist at Realtor.com, suggests sellers be patient but also smart about pricing to attract buyers. Even with challenges, he thinks 2020 will be strong for the U.S. housing market.
He says, "Housing is still a solid foundation for the U.S. economy going into 2020. Even though the economy might slow down a bit—due to global uncertainty, business investment, and trade issues—the real estate basics are still solid: consistent demand, limited supply, and careful financial lending."
Millennials will drive the industry's growth
Just like many other industries, millennials are set to lead the U.S. housing market for at least the next ten years. A recent report by Realtor.com shows that millennials have more savings than ever and are making bigger down payments on homes.
This means realtors should really focus on millennials when selling or renting properties.
Plus, because millennials are so tech-savvy, companies might end up spending a lot on online ads and marketing to grab the attention of potential homebuyers.
Takeaway
Looks like the U.S. housing market is set for another solid year in 2020, even with house prices going up. Mat Ishbia, CEO of United Wholesale Mortgage, totally agrees, thinking 2020 is a prime time to buy.
He said, "From a homebuyer perspective, affordability is great. The Spring purchase season in 2020 will likely have a lot of legs and could carry on through the Fall."
Given how things are shaping up, both buyers and sellers should find plenty of chances to do well this year. Just keep an eye on the bigger economic picture for any potential bumps in the road.
Well, there you have it—a peek into what's cooking in the U.S. housing market for 2020!
It’s looking like a pretty good year all around. So go ahead, dive in and make the most of it, whether you're looking to buy, sell, or just keep an eye on things. And hey, if you found this review helpful, why not spread the word?
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