What to Expect From the Housing Market in 2020

But concerns about the economy shouldn’t inhibit the housing market significantly, or at least not for long. Daryl Fairweather, chief economist for national real estate brokerage Redfin, says the low mortgage rates and the chance to buy a home now as opposed to later will be enough encouragement for homebuyers. “Once they see prices picking up, they’re going to get this fear of missing out,” she says.

The cities and metro areas where the population is growing fast due to new residents moving in are where you’re likely to see home prices increase the most. These markets, which Fairweather notes are more likely to be mid-tier cities in the Midwest or South, such as Charlotte, North Carolina, Charleston, South Carolina, and Richmond, Virginia, that are just a short flight from larger cities like the District of Columbia or Atlanta.

The influx of new residents certainly drives up property values as demand increases over the long term, but that means the buyers on the market are more likely to be transplants than lifelong locals. “Any time we see a big increase in migration, prices go up and locals may feel it become unaffordable for them,” Fairweather says.

The newest generation in the housing narrative, Generation Z, a group often defined as made up of those born between 1996 and 2010, is largely not ready to purchase a home yet. But expect some 18- to 22 year-olds, the oldest Gen Zers, to be a small portion of the market in 2020. Ryan Gorman, president and CEO of Coldwell Banker NRT, says the Gen Z individuals who are looking to buy now are early adopters, and they’re more likely house hunting in small or midsize Midwestern cities where the cost of living is low.

“That segment (of the generation) is able to purchase, and the inventory is there for them to purchase,” Gorman says.

Selling

Home sellers will likely benefit from the number of buyers encouraged by low interest rates, and home prices are expected to continue to trend upward. But don’t expect any home price explosions on a large scale.

“I don’t expect home price appreciation to be much of the story in 2020, but we’ll see a continuation of what we’ve been seeing,” Gorman says. He adds that home prices should grow and keep sellers and homeowners who are hoping for a rise in their property values happy. But prices should not grow so quickly that markets risk a price correction or buyers hit their price ceiling.

There aren’t expected to be many sellers in 2020, however. National real estate brokerage Re/Max reports that in October 2019, the inventory for homes for sale was 9% lower than the same month in 2018 across 54 metro areas. The low inventory trend, at least compared to the number of consumers looking to buy, is expected to continue through 2020. Many homeowners locked in low mortgage rates over the past decade, so many don’t feel the need to move; they’ve built equity in their homes and continue to have a low, fixed-rate mortgages with no need to refinance.

Plus, the baby boomer population appears to be focused on aging in place rather than downsizing or moving to different accommodations in retirement, Kushi says. Combined with the low mortgage rates they already have on their homes, seniors aren’t feeling much incentive to move.