Experts Predict Housing to Become Buyers Market by 2020
by Editorial Staff
A persistently strong economy, backed by a strong economic forecast, low unemployment, and burgeoning Millennial buyers, combined with years of limited construction continue to drive home values and housing demand above their historic pace. While housing growth nationwide is at an all time high, current housing trends are starting to lose their edge in some of the nation’s biggest markets. More than 70 percent of experts predict that housing will shift toward a buyers’ market by 2020, starting in the Midwest during late 2019 and then extending regionally to the Northeast, South, West and the rest of the nation by year-end 2020.
2018 will continue to see strong appreciation in home values in many markets, with a predicted 6% annualized increase through 2019. While some experts have adjusted their previous growth projections upward from a year ago, the consensus remains that the housing market beyond 2020 will experience a downward trend in real estate appreciation, demand, new housing starts and the market will once more begin to favor buyers.
What to Expect for 2019 Heading into 2020
According to the NAR home sales rose over 9% nationwide in July 2018. However, new housing construction starts fell by over 12% during the preceding month, and multifamily starts also saw a decline during the same period, suggesting that the housing market is beginning to turn. Home prices will continue rise throughout 2018 and into 2019 in some of the strongest markets, but housing appreciation nationwide should taper out toward 2020.
According to Zillow, many housing markets have already seen housing prices begin to fall and home price growth is beginning to slow in nearly half of the 35 largest U.S. markets. Nationally, the percentage of listing price cuts was up YoY 14.2%. In San Diego, one of the largest U.S. metropolitan housing markets, 20 percent of active real estate listings experienced a price cut during June 2018, compared to 12 percent a year ago. Other major housing markets, including Seattle, Washington and Austin, Texas are also experiencing price cuts in housing listings. Experts predict that among the largest U.S. housing markets Indianapolis, IN, San Jose, CA, and Charlotte, NC could be next to see price growth slow.
One of the biggest driving factors behind the burgeoning housing market of 2015-2018 has been pent up demand due to a deficit of housing inventory. Housing inventory has declined YoY for 42 straight months. However, the decline is now decelerating. A few months ago it was declining at a rate of 8% per year, now it’s declining at 4% per year. Consequently, homes are beginning to sit longer on the market, and as they do buyers gain a stronger hand at the bargaining table. By 2020, housing shortages should dwindled and buyers find themselves in a stronger purchasing position.
2020 and Beyond
People are beginning to focus on fall elections and the 2020 Presidential race. Investors are anxious to buy or sell at the right time. While most money is on President Trump narrowly winning a second term, a defeat could drive both the US stock markets and housing markets downward. A second Trump term will most likely ensure continued protection for US business startups and continued economic growth and stability in housing markets.
Even if President Trump remains in office, some real estate experts predict the housing market will experience a decline beginning in 2020. In a quarterly survey, conducted by Pulsenomics LLC, over half of more than 100 real estate experts surveyed predicted that the next recession would begin in 2020—citing monetary policy as the likely cause.
Without question, toxic mortgage lending and the housing market collapse lead to the Great Recession of 2007 to 2009, but few experts today believe the housing market will be at the center of the next downturn. Most experts point to U.S. monetary policy, specifically hikes in short-term interest rates, as the likely culprit leading toward a recession in 2020. Higher interest rates will eventually slow the pace of home value appreciation providing a welcome respite for would-be buyers.