This year might be filled with surprises in the residential real estate market. This fall will bring a presidential election and possibly a recession by the end of the year. For those who would like to predict events in the 2020 U.S. housing market, it will be a challenging year. As a result, it is extremely important to examine the combined projections from the most trusted entities in the industry when it comes to mortgage rates, home sales, and home prices. The data might surprise you.
According to the major players in the field of real estate financing, Freddie Mac, Fannie Mae, the Mortgage Bankers Association (MBA), and National Association of Realtors (NAR) all forecast mortgage rates remaining at a stable rate throughout 2020:It would be easy to take the opportunity for granted since rates have remained under 5% for the last decade, but it wasn’t so long ago that interest rates severely affected housing affordability.
Here are the average mortgage interest rates over the last several decades:
Most of the expert groups noted above also predict an increase in home sales in 2020, and with only Freddie Mac predicting that the transaction number will remain stable:Mortgage rates remain near all-time lows, demand most likely will not be a concern. However, there is a lack of inventory which might moderate the increase in sales.
Below are the predictions for home values in the coming year from six different expert entities that focus on understanding house values in the United States: Fannie Mae, Freddie Mac, CoreLogic, Ivy Zelman’s “Z Report”, the National Association of Realtors (NAR), and the Mortgage Bankers Association (MBA). All five agree that the indicators are for home values to continue to improve through 2020. Four of the experts see price appreciation increasing more than it did in 2019.
Over the course of the last year, many economists started predicting a recession that may occur in 2020. Also, a recent survey of potential home purchasers showed that mo the majority agreed it would occur this year. The economy, in contrast to those projections, remained strong in the fourth quarter, and that has caused many to rethink their assumptions.
Goldman Sachs, reported in their 2020 U.S. Outlook:
“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.”
While we experience growing demand and a limited supply of our real estate inventory, home values will continue to appreciate, while the threat of an impending recession seems to be softening. Mortgage rates are projected to remain under 4%, causing sales to increase in 2020. It looks like 2020 may be a solid year for the real estate market.