If you’re planning to buy or sell a house in 2020, patience may be in order, as the housing market is expected to be relatively stagnant, a new forecast shows.
Real estate marketplace Realtor.com unveiled its Housing 2020 Forecast, which features projections for the coming year for homebuyers and sellers. Though they predict mortgage rates will remain low, averaging 3.85% throughout the year, they found that affordability and inventory shortages will likely create challenges for consumers looking to buy and sell.
Millennials, which the report defines as those born between 1981 and 1997, are expected to fuel the most purchases. In fact, the forecast predicts that millennials will be responsible for more than 50% of home purchases in 2020. Comparatively, Gen Xers are projected to take 32% of new mortgages and baby boomers will initiate 17% of new mortgages. The forecast also predicts that many Gen Xers and boomers will hold onto their current homes rather than seek to buy a new one.
Inventory problems continue
One of the challenges expected to plague the market is inventory shortages, meaning there won’t be enough affordable housing for those looking to buy. In fact, the forecast predicts inventory will remain stagnant throughout the year and could even reach a historic low. Existing home sales are also projected to decrease by 1.80%.
One reason there may be a shortage of inventory is because some sellers won’t feel that selling is in their best interest. The forecast predicts that home prices will be flat in many regions, with an increase nationwide of only 0.8%, so sellers may choose to hold onto their houses until they can get more money for them.
Prices are also predicted to go down in more than 25% of the 100 largest metropolitan areas, including Chicago, Dallas, Las Vegas, Miami and San Francisco, the forecast shows.
Good news and bad news for buyers and sellers
Finally, the forecast looks at the year from the perspective of those planning to buy and those hoping to sell.
The good news for homebuyers is that low mortgage rates may make it easier for them to qualify for a larger mortgage. However, many will struggle to find homes because of the inventory challenges, particularly in the entry-level market.
Sellers will also face challenges. Those looking to sell entry-level homes may be able to get the price they want quickly since there will be a lot of competition for those homes. But sellers who are selling houses that are on the upper end of the market may have to exercise patience and settle for lower prices to make the sale, the forecast projects.
While the market definitely plays a role in your ability to buy or sell a house, it’s also important to make sure you’re financially ready if an opportunity arrives. Those who are hoping to become a homeowner for the first time can check out loan programs for first-time homebuyers. Other tools such as first-time home buyer savings accounts can contribute to your success in becoming a homeowner.