The saying goes that the future belongs to the young.
So, too, apparently, does real estate.
In the 2020 National Housing Forecast from Realtor.com, a number of predictions stand out, among them that home price growth will flatten, to a rate of about 80 basis points. In addition, according to the study, affordability will be key, which will be a benefit for mid-sized markets.
In discussion of economic conditions, the report states that global headwinds are gathering to slow GDP growth to a modest 1.7 percent gain in the U.S. in the current quarter. The unemployment rate may grow to 3.9 percent by the end of the year, up from a current 3.6 percent. Consumer confidence is likely to soften, said the firm.
Yet against that backdrop, according to Realtor.com, the supply and demand equation will still see an imbalance, where demand will outstrip supply.
“The market is still years away from reaching an adequate supply of homes to meet today’s demand from buyers. Despite improvements to new construction and short waves of sellers, next year will once again fail to bring a solution to the inventory shortage. In 2020, we expect inventory to struggle to grow and could instead reach a historic low level,” said the projections.
Demand will be robust, the report said, and with low rates, rising rents and “the ever-expending Millennial population” all contributing to that demand. The data show that millennials’ share of mortgage originations will pass 50 percent this spring — outnumbering boomers and Gen X’ers.
“The move to affordability trend will continue in 2020, fueled by the twin forces of Baby Boomers retiring and seeking sunnier weather, lower taxes and lower cost of living, and Millennials searching for family-friendly lifestyles and affordable housing. Home buyers are increasingly looking not only at suburban environments near large metropolitan areas, but also considering options across state lines.”
In terms of regions, Realtor.com said cities in Arizona, Nevada and Texas will continue to benefit from shoppers looking for more affordable alternatives to California. Meanwhile, shoppers from expensive Northeast markets will find the warmer options in the Carolinas, Georgia and Florida attractive.
In terms of types of housing, the report projected that “as the luxury market cools, builders signaled their intent to increase offerings in the mid-price segment … buyers will continue to struggle with affordability, even with mortgage rates in an approachable range, as entry-level inventory is expected to remain constrained. The broad price moderation will continue to offer opportunities in mid-sized markets in the Midwest and South.”