If you are hoping to purchase a new home this year, you’ll want to feel assured you are getting value for money. It leaps of faith to make such a large purchase, and one that, for most people will mean their money is tied up for 30+ years. Top real estate sites will encourage you to buy, though when the housing market is unpredictable and uncertain, it can be wise to hold off to ensure you don’t purchase a property that will decrease in value over the years.
There aren’t many thought leaders or economists who suggest 2020 will be a fantastic year for house prices. However, there aren’t many who say it will be a terrible one either. On balance, the prediction is that 2020 should be reasonably positive for the housing market, and this could be a good thing for those looking to purchase a new home this year.
Of course, forecasts are not always accurate predictions of the future, and if interest rates start to soar, this could lead to a different story. However, most forecasters say they are confident in their reports that the trajectory will remain steady.
That said, forecasting does tend to begin more positive at the start of a new year, and then slowly become more conservative as the months pass by. Looking back over previous years, forecasts have not always matched up to reality. In 2019, for example, it was predicted that mortgage rates would remain high, which would thus have a knock-on effect in terms of property sales, but not by much. This prediction was one that forecasters got slightly wrong as the slowdown was much more significant than they suggested. However, most mortgage rates then dropped throughout the year and in September reached a three-year low, and this aligned with what they expected to happen.
To find out what the experts are forecasting for 2020, you can look to the National Association of Realtors, Fannie Mae, FMCC, the Mortgage Bankers Association, Willow, or realtor.com. It is not expected that mortgage rates will significantly decrease, though they should remain under 4% for the entirety of the year.
The Federal Reserve has reported it will be in a holding pattern for the time being, with no plans for this to change in the foreseeable future. It is unlikely that interest rates will go up unless inflation significantly increases. This is good news for those looking for a mortgage, as while the same bodies do not control both mortgage and interest rates, mortgage rates tend to reflect interest rates and will be priced according to the bank’s fluctuations.
The fact that central banks are cutting interest rates is another positive for those looking to buy a home and should spell out continued low mortgage rates for those hunting for their ideal property.
It is worth considering the potential trade deal between China and the U.S. that is currently on the table, which could affect rates (though this is not due to take place until early in 2021). Signing a deal could result in increased inflation and force the Federal Reserve to put rates up, which could mean mortgage rates increase also.
New home construction can also have an impact on a person’s decision to purchase as in a buyer market; it is best if there is more supply than demand. This, however, looks unlikely as while there will be continued construction throughout the year, expectations are that activity will not support demand. It is thought the supply of homes for sale will continue to remain extremely low. Just over 1 million homes each year are generally required to keep up with demand, and the expected number of new homes to be built in 2020 is significantly fewer. It is also possible that the shortage will increase due to people hoping the markets turn and prices rise before putting their homes up for sale.
However, as the baby boomer generation reaches retirement and looks to downsize, or passes away, additional inventory could open up. Though whether these homes will appeal to those looking to buy their first properties or live near where they work is another question.
Realtor.com has suggested that the total volume of home sales will decrease this year despite there being significant buyer demand. The scarcer houses are, the more likely there will be bidding wars for the more desired properties, hiking up prices overall, and leaving those with more modest budgets unable to find anything suitable. This, however, will have a knock-on effect, with some houses becoming unaffordable and, therefore, unsaleable, meaning that there will be an eventual drop or evening out in some parts of the country.
It is also likely that more homes will be bought by real-estate companies directly. This model could appeal to those who want to sell their homes quickly and who need flexibility in the process as the seller is effectively in control of when the sale goes through, and they need to vacate. This means sellers can then select a closing date that aligns with the purchase of their next property.
Understanding and predicting the housing market is tricky, and buyers are advised to follow it carefully to get the best idea of whether it is the right time to buy or sell their home. However, in general, the housing market is looking stable, so if you are hoping to buy a property in 2020 and you find your dream home, for the time being, there is little reason not to.