This will be an interesting year for residential real estate. With a presidential election taking place this fall with accompanying negative economic talk, predicting what will happen in the 2020 U.S. housing market can be a challenge. As a result, taking a look at the combined projections from the most trusted entities in the industry when it comes to mortgage rates, home sales, and home prices is incredibly valuable – and they may surprise you.
Projections from the experts at the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), Fannie Mae, and Freddie Mac all forecast mortgage rates remaining stable throughout 2020:
Since rates have remained under 5% for the last decade, we may not fully realize the opportunity we have right now.
Here are the average mortgage interest rates over the last several decades:
- 1970s: 8.86%
- 1980s: 12.70%
- 1990s: 8.12%
- 2000s: 6.29%
Those of us of a certain age can remember a time in the “80s when mortgage interest rates were as high as 18% making today’s historically low numbers especially significant.
Three of the four expert groups noted above also predict an increase in home sales in 2020, and the fourth sees the transaction number remaining stable:
With mortgage rates remaining near all-time lows, demand should not be a challenge. The lack of available inventory, however, may moderate the increase in sales.
Below are the projections from six different expert entities that look closely at home values: CoreLogic, Fannie Mae, Ivy Zelman’s “Z Report”, the National Association of Realtors (NAR), Freddie Mac, and the Mortgage Bankers Association (MBA).Each group has home values continuing to improve through 2020, with four of them seeing price appreciation increasing at a greater pace than it did in 2019.
Is a Recession Possible?
In early 2019, a large percentage of economists began predicting a recession may occur in 2020. In addition, a survey of potential home purchasers showed that over 50% agreed it would occur this year. The economy, however, remained strong in the fourth quarter, and that has caused many to rethink the possibility.
For example, Goldman Sachs, in their 2020 U.S. Outlook, explained:
“Markets sounded the recession alarm this year, and the average forecaster now sees a 33% chance of recession over the next year. In contrast, our new recession model suggests just a 20% probability. Despite the record age of the expansion, the usual late-cycle problems—inflationary overheating and financial imbalances—do not look threatening.”
The threat of a recession kept sellers, in particular, on the sidelines in 2019. Hopefully, continued positive economic news will move them onto the playing field where buyers are waiting. Talk of recession also held back a percentage of buyers, who were waiting for prices to drop as the result of the down turn. If both get in the game, 2020 will be a good year.
From our perspective, the market is strong. We ended 2019 with over $3.3 million in closed sales over a six week period from mid-November through the end of December. (See this linked video for the details.) We both were out with buyers on New Year’s Eve day and have a colleague, who showed a home and took an offer (that was accepted) on New Years Day!
As always, if you’re thinking of making a change in your living situation, we’d be happy to meet with you to discuss options. Please contact us at 508-568-8191 or [email protected] Thanks.
Wishing you a happy and positive 2020…
Mari and Hank