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6
Buyer Confidence and Low Mortgage Rates Will Drive the Market in 2020
Look for prices to continue to increase in 2020, as demand continues to exceed supply in affordable homes, and more first time buyers enter the market. REAL Trends analysis shows there is no correlation between a presidential election year and housing sales. Buyer confidence, historically low mortgage rates and the availability (or lack thereof) of inventory will determine home sales in 2020. Across our region in 2019, 2% fewer properties sold than in 2018, but sales volume was up 2% because the average sales price was up 4%. There was considerable variation from market to market, which can be seen on our Regional Activity Chart below.
Forecast for 2020
1. Appreciation and Price Increases Will Continue
In our region, homes appreciated from 2.02% to 3.52% last year, depending on the market and the price range. See the chart below for appreciation details by market, and changes in average sales prices by market on the chart above.
2. Mortgage Rates Will Remain Low
Projections from experts all forecast rates will remain stable throughout 2020, with 30-year fixed-rate hovering around 3.7% - 4.1%. As of January 10, rates with no points were lower than this time last year: 15-year Conventional Fixed: 3.000% 30-year Conventional Fixed: 3.500% FHA/VA 30-year Fixed: 3.375% 5/1 ARM (Adjustable Rate Mortgage): 3.500% The higher the buyer's credit score, the lower the mortgage rate they are eligible for. Since rates have remained under 5% for the last decade, borrowers may not fully realize the opportunity they have right now. Here are the average mortgage interest rates over the last several decades: 1970's - 8.86% 1980's - 12.70% 1990's - 8.12% 2000's - 6.29%
Sellers who have been waiting for the right time to sell - this is it!
3. Affordable Inventory in High Demand, but Short Supply
There is even some concern for the possible return to bidding wars for affordable homes, which is good news for sellers in affordable price ranges. Investors continue to absorb 20% of our inventory. Further, homeowners are staying put longer and builders aren't keeping up with demand for affordable new homes.
4. Millennials Will Drive Housing Trends
As Millennials, or generally people born in the early 80's through the mid 1990's, hit their prime home buying age they will continue to drive housing trends in the coming year. That will lead to increased interest in smaller houses that are more affordable. Realtor.com says millennials - with the oldest approaching 40 and the biggest cohort turning 30 in 2020 - will surpass 50% of all home purchase mortgages. Over 90% of Millennials say they eventually want to buy a house, and 48% told a Harris Poll they plan to buy a home in the next five years. 26% expressed interest in buying a home in the next 12 months. What's the holdup? Student debt and the false belief that they need a 20% down payment. The big problem is their lack of awareness of their many options:
1) FHA allows a buyer to put down less than 5%
2) Fannie Mae and Freddie Mac also have low down payment programs
3) VA Loans for veterans can go to 100%
4) Rural areas and many states and cities also have loan down payment programs. Plus parents and grandparents can be a great help. The key is for Millennials to meet with a mortgage advisor to learn about all of their options and to figure our a game plan that works best for their particular life plan.
Contact Ruhl Mortgage at RuhlMortgage.com or 866-441-1862 for a consultation.
