2020 Real Estate Market Outlook

Posted by Judy Orr on Wednesday, January 1st, 2020 at 6:13pm.

scottsdale real estate market 2020

Despite some recession scares predicted for 2020, we are in a lengthy healthy economy and many experts don't see things slowing down anytime soon. It is believed that the real estate market will continue growing in the coming year.

With that good forecast for 2020, we will see a recession at some point, and you might wonder how this will affect the real estate market when it occurs.  In the Great Recession of 2008, prices plummeted, but that hasn't always happened with prior recessions.  Most believe that prices dropped so drastically because they were highly inflated to begin with.  Income was not keeping up with the housing market and I knew it couldn't get much higher.

In our past 5 recessions, during three of them, home prices actually increased according to ATTOM Data Solutions.  Prices only decreased two times, in 1990 (less than 1%) and 2008.  So what will the real estate market look like in the future?

Real Estate Prices Will Continue to Increase

It is predicted that no matter if there is a recession or not, prices of home will keep going up. CoreLogic, a real estate data company, is forecasting higher prices in 2020 vs 2019, although the highest increases will be more noticeable in lower price ranges.  This will result in fewer first-time homebuyers being able to afford to buy 

Because builders are constructing higher-end homes in order to make the best profits, the first-time buyer starter homes will continue increasing in value.  It is basic supply and demand.  Since builders aren't building low-end homes, there will continue to be more competition, pushing prices up, which creates a domino effect.

Lawrence Yun, who is the National Association of REALTORS Chief Economist, states that “Real estate is on firm ground with little chance of price declines."  He also points out that we need more inventory to stablize prices, and it all starts with the lower priced inventory.

If you're on the fence about buying a home in the future, you should consider moving ahead since prices and rents will continue getting higher.

Inventory Will Continue to be Low

As a Realtor since 1983, it used to be a mantra that people lived in their homes for an average of 7 years. That has changed! In 2019, the average homeowner had resided in their home for 13 years, up from just eight years in 2010.  With a lack of new construction, there are simply not enough homes to keep the buying cycle affordable, especially for first-time buyers.

 Although that sounds terrible for homeownership, the National Association of Realtors (NAR) expects housing starts to be around a million in 2020, which is the highest amount of new construction since 2007.  Some builders are actually shifting into more affordable homes and I think those that do will see quick sell-outs of their subdivisions.  The truth is that these builders won't reap the high profits that they would see if they built higher-end properties.

For the small number of builders that will build more affordable housing, it still won't be enough to meet the demand of buyers that can only qualify to purchase lower-end homes.  So although prices will continue to rise, inventory might actually be lower.

If you're a first-time buyer you will most likely be up against other first-timers and will be involved in multiple offer situations, which we've seen for a while now.

What Will Happen to Mortgage Rates?

The Mortgage Bankers Association predicts rates will remain low, at around 3.7%, through mid-2021.  That might not sound like such a big deal, but with a mortgage of $200,000, for example, that can be a savings of about $145.00 a month!  That adds up to $52,000 over the 30-year span of the mortgage.  Low mortgage rates open up the doors for first-time buyers.

No one knows how long rates will remain low, so if you're thinking of buying a place, you shouldn't wait.  Depending on what happens during the economy and the election in November, rates can rise quickly.  If you need to sell your current residence first and already have a low rate, you want to get another low rate for your next purchase. 

Millennials Will Be the Driving Force in 2020 Real Estate

Millennials will have more than half of all mortgages in the coming year.  They will actually outnumber Generation X and Baby Boomers combined!  It makes sense because they will be in their 30's, where many families can finally afford to purchase a home and are ready to put down roots and have families. 

When a generation starts getting older, they are more willing to leave the big cities to raise their kids back in the suburbs.  They are now considering giving up that urban lifestyle they enjoyed when they were in their 20's.  They're getting to an age where they're ready to settle down. 

If you're a Millennial who has enjoyed living in the city but now need more space to grow a family, you can usually get more for your money in the suburbs.

be prepared for buying or selling real estate in 2020

START PREPARING TODAY If you plan to BUY this year:
  1. Get pre-qualified by a lender. This should be the 1st step in buying a home if you're going to be financing the purchase.  I recently worked with a buyer that told me she was pre-qualified and found out that wasn't quite true.  She fell in love with a condominium that I showed her.  She then called her loan officer as she was finally serious and found out she can only qualify for FHA financing.  This condo complex isn't FHA approved and there really is nothing available in her price range and with the amenities she wants.  She is broken-hearted and could have saved herself this sadness by having been fully pre-qualified prior to looking at places.
  2. Make a list.  I can set you up with an automated search directly from the MLS.  I need to know the areas you're interested in, the number of bedrooms & baths you need and any other amenities you must have.
  3. We'd love to meet you. We can start viewing places as soon as you're pre-qualified.  We like to get to know you in a property as it tells us more than just meeting you in our office.  Even if you're not quite ready yet, we could meet at an open house or at a coffee shop if you prefer.
If you plan to SELL this year:
  1. Call us for a FREE Comparative Market Analysis (CMA).  We try to create our CMA's as similar to how an appraiser creates their appraisals.  We'll give you our honest opinion on the best pricing strategy to get your home sold.   
  2. We'll do a walk-through.  We can help you prepare your home to get top dollar and a quick sale.  Buyers are pickier today than ever before.  They're seeing "like-new" flips that are at or near the same price range as regular resale homes.  They have high expectations in all price ranges and don't want to take on too much work.
  3. Start decluttering.  We're not professional stagers, but we can help you with streamlining your home so it shows at its best.  You're going to have to pack things when you're ready to move and sometimes certain things should be packed now, before opening your home to buyers.  We'll help you with it.  We don't ask a seller to do anything we wouldn't do ourselves when we sell our places.

We're Here to Help!

We are local real estate agents and know our market.  We can help you find the best property for your price range and amenities.  We can also help you sell a city condo or a starter home and help you move up. 

If you’re considering buying or selling a home in 2020, contact us now to schedule an appointment.  Give us a call at 708-536-8200.

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