June 9, 2020
All Real Estate News
According to the Goldman Sachs’ 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.”
Housing remains a solid foundation for the U.S. economy going into 2020.
George Ratiu, Senior Economist at realtor.com
Housing is actually preventing the recession from taking place at this moment because the housing market is so strong.
If we take a look at the National Association of Realtors, the Mortgage Bankers Association, Fannie Mae, and Freddie Mac, each of them project going forward into 2020 that we will have more homes sold than we did in 2019.
We expect mortgage rates to remain low over the next two years, averaging 3.8% in 2020 and 2021.
Freddie Mac
There are some experts that think they might even go below that – under 3.5%. So, interest rates are projected to be nice and low for the next two years, and that will continue to drive the market.
It is not just Freddie Mac that thinks that going into this year. If we take a look, Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors also agree that rates will be between 3.5 and 3.8% this year. So, everything looks like it’s heading in the right direction, but the biggest issue to the housing market we will face in 2020 is an inventory shortage.
In 2020, we expect inventory to struggle to grow and could instead reach an historic low level.
realtor.com
The latest numbers of month’s supply of inventory is down from last year, and is down from last month. The month’s supply of unsold inventory is definitely decreasing. Remember a normal market would have six months’ inventory, and right now we’re down to 3.7, and they’re projecting that might continue to fall.
The flipside of that is new construction.
We now expect single-family housing starts and sales of new homes to increase substantially, aided by a large uptick in new construction as builders work to replenish inventories drawn down by the recent surge in new home sales activity.
Doug Duncan, Chief Economist at Fannie Mae
Just like existing home sales, new home sales really took off because of the lower interest rates. So, what we’re seeing is they’re going to be building more and more homes, and we’ll be reporting on that over the next couple of months.
Despite improvements to new construction and short waves of sellers, next year {2020} will once again fail to bring a solution to the inventory shortage… As millennials embrace homeownership and take advantage of this year’s unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish… The issue is further compounded by the fact that sellers tend to be more reluctant to list during the colder time of year when the market typically makes a seasonal slowdown.
Senior Economist at realtor.com
There’s already a shortage of inventory, and what they’re saying now is, in the winter months, it slows down even more because the consumer believes there are not a lot of buyers out there.
As shoppers modify their strategies for navigating a housing market that has become more competitive due to rising prices and low inventory, the search for a home is beginning earlier and earlier. With housing inventory across the U.S. expected to reach record lows in 2020, we expect to see this trend continue into the new year.
George Ratiu, Senior Economist at realtor.com
More and more buyers are coming out earlier and earlier.
A recent study came out by Move.com showing that people have begun the home search earlier each year since 2015. They are not waiting for the spring buyer’s market. That study also showed that January 2019 fell just one percentage point behind February for the highest number of views per listing. There were more people looking for houses. The last thing that the report stated was in 20% of the large markets, January saw the highest number of listing views in 2019. Sellers tend to be waiting for the rest of the competition to come out when the buyers are out right now.
The nation’s 12.6% growth in home showings compared to 2018… was the most significant jump in buyer traffic during the current four-month streak of year-over-year increases. The West Region saw the greatest growth in activity with a 23.1% jump – the region’s greatest in the history of the Showing Index.
ShowingTime
So, the increase in the amount of buyers that coming into the market is setting historic numbers. Now, obviously, the West was the best, but we can see that in the South, the Northeast, and the Midwest showed dramatic increases in the amount of buyers out there right now.
We expect home prices to rise at least another 5% over the next 12 months.
Frank Martell, President and CEO of CoreLogic
See the chart below for the projected increases in home values this year.
The Home Price Expectation Survey (a survey of over 100 economists, market analysts, and real estate experts) results are below. We can see they think that price is going to slide a little bit, but then we’re going to have a slow increase to the normal about 3.5-4% rate by 2024.
If someone buys a house this January for $250,000 (which is about the average sales price), we’re seeing they could have a growth of $47,500 just in the appreciation buildup the equity.
In the last 12 months, 44 states had an increase in home equity. Only one had a decrease. We can see that some states had dramatic amounts of increase in just one year.
As homeowners gain equity in their homes, they are more likely to consider using the equity to purchase a larger or more attractive home.
Mark Fleming, Chief Economist at First American
A NAR report came out showing if you take a look at that price of the house people sell and the price of the house they then purchase after they sell it, there’s some dramatic increases all the way up to the age of 55.
So, as people are building equity, they now have the down payment to really buy the house they really want.
So… what’s going on in Tallahassee?
1,178 NEW LISTINGS |
$215,252 AVERAGE SOLD LIST PRICE |
$231,296 AVERAGE UNSOLD LIST PRICE |
---|---|---|
430 SOLD |
$209,137 AVERAGE SOLD PRICE |
89 AVERAGE DAYS ON MARKET |
PERCENTAGE LISTINGS SOLD |
% SALES PRICE TO LISTING PRICE |
PERCENTAGE HOMES EXPIRED |
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