Economic and Housing Market Predictions for 2020
Let’s look at the year ahead by weighing various factors that impact both the real estate market and the broader economy.
Happily, we’re not forecasting a recession in 2020. Overall, the stock market is doing well and the trade conflict has died down. While pundits do forecast GDP to decrease slightly and unemployment to increase slightly, we predict it will be another stable year for the housing market.
One of the burning issues in our 2020 forecast is what the Federal Reserve will do with interest rates over the next twelve months. For now, they say they have no plans either to cut or raise rates in 2020.
A stable economy and a low federal funds rate will keep mortgage rates low by historical standards. The California Association of Realtors (CAR) predicts that the average for 30-year-fixed rates will dip to 3.7% in 2020, down from 3.9% in 2019 and 4.5% in 2018.
CAR predicts that median home prices will be stable this year, with a slight increase of 2.5%. Affordability will remain unchanged, with 32% of California residents able to buy a median-priced home. Home sales are predicted to increase by 1%.
Like at the end of 2019, this year’s homebuyers will face a severe lack of supply, higher home prices, and greater competition. As Jordan Levine, Deputy Chief Economist of CAR, said during the fourth quarter of 2019:
“In some ways, the market is going to start looking like 2016—where inventory was very tight, the market was more competitive on the buyer’s side. That leads to more growth but it also limits the amount of sales because we have a significant dip in active listings. We are at the lowest level in almost eight years.”
In 2020, we believe the severe shortage of available housing will cause more residents to leave the state. According to CAR’s 2019 State of the Housing Market Study, 30% of sellers planning to repurchase said they will buy their next home in a state outside of California. This is the highest rate of prospective buyers moving out of state since 2005.
Median Price Predictions for East Bay Counties in 2020
The 2020 housing market in the East Bay will strengthen in favor of sellers, and both single-family homes and condos should increase in price. The following chart, based on CAR’s median price predictions for the upcoming year, shows we can expect prices finishing up 2.5% year-over-year:
As the new year gets underway, we remain committed to helping our clients achieve their current or future real estate goals. Our team of experienced professionals is ready and eager to talk in more detail about all the information we’ve shared here. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.