December 2019

Will 2020 become a buyer's market? Time will tell.

It’s December, and all eyes are on the new year. Without a crystal ball to predict whether 2020 will continue to be more of a seller’s — rather than transitioning into a buyer’s — market, the best we can do is to keep you aware of the current situation and how it may affect your clients’ decisions to buy, sell or wait.

Trends in the real estate market are influenced by inventories, home prices, interest rates, days on market, regional differences, population shifts, global stability and more. Let’s take a look at the implications of a few of these factors.

Housing inventories.

As of September, year-over-year housing inventories had fallen nationally for 42 straight months, going back to 2016.Footnote1 This shortage of homes could have increased competition and may have driven up prices for homebuyers, especially for entry-level and mid-priced buyers. The more expensive housing market has largely escaped this imbalance. New this year, inventories at all price levels have begun to stabilize.Footnote1

Home prices.

Dating back further to 2013, the rise in home prices has outpaced income gains by 31%!Footnote2 This discrepancy has contributed to the lack of affordability of homes in recent years. Since the start of this year, the acceleration rate of home prices has begun to moderate, including in more than half of our nation’s 35 largest metro markets. Some forecasts put the appreciation rate for 2020 on a steady 3.7% pace.Footnote1 If this were to hold true for next year, it would become another indicator of a healthier balance between buyer and seller.

Mortgage interest rates.

Historically low over the last several years, fixed mortgage rates are poised to drop even lower. For starters, they tend to follow long-term bond rates, such as U.S. Treasurys, which have fallen markedly this year.Footnote3 Additionally, mortgage rates are inclined to contract during times of global and economic uncertainty;Footnote4 one aspect is the U.S.-China trade dispute.Footnote3 Another is next year’s election. And while these factors point toward a buyer’s market, it’s important to remember that even a lower mortgage rate doesn't help with down payments. Taken together, this could translate into a general slowdown in the housing market.

Millennial impact.

Another important consideration, before putting undue confidence in a 2020 buyer’s market, is the impact of the immense millennial market. Without a dramatic uptick in inventories and over 70 million millennials in their peak home buying years, the pressure on demand for entry- and mid-level homes in metro markets could help sustain the persistent seller’s market.

Regional differences.

One common feature of most real estate trends is they’re more regional than national, or at least they start out that way. On a macro level, it appears that the Midwest is more apt to shift toward a buyer’s market before that would occur in the South, West or Northeast.Footnote1 In a few noteworthy cities — Pittsburgh, Oklahoma City and Memphis — metro markets recently experienced significant declines in inventories that further tightened the supply for buyers.Footnote1 In contrast, inventory gains in Seattle and San Jose have made these two West Coast cities a bit more buyer-friendly.

Real estate is a complex enterprise. What benefits some of your clients, those who were sellers over the past few years, can come at the expense of your clients who are buyers. Some signs point to a shift from a seller’s market to a more balanced relationship or even to a gain for buyers. The only prediction that’s guaranteed for 2020 is the world of real estate will remain interesting.

As a Bank of America lending specialist, I’d be happy to speak with your client about an Affordable Loan Solution® mortgageFootnote5 or other assistance through our Down Payment Center.

1

Will the 2020 US Housing Market Be A Seller’s Market Or A Buyer's Market?,” MASHVISOR, Eman Hamed, September 15, 2019

2

Will 2020 Be a Good Year to Buy a Home in the U.S.?,” Home Buying Institute® (HBI), Brandon Cornett, September 5, 2019

3

Surprise: Forecast Predicts Mortgage Rates Could Be Lower in 2020,” Home Buying Institute® (HBI), Brandon Cornett, September 9, 2019

4

Fall housing shifts quickly to a buyer's market,” CNBC, Diane Olick, September 9, 2019

5

Maximum income and loan amount limits may apply. Fixed-rate mortgages (no cash out refinances), primary residences only. Certain property types are ineligible. Maximum loan-to-value (“LTV”) is 97%, and maximum combined LTV is 105%. For LTV >95%, any secondary financing must be from an approved Community Second Program. Homebuyer education may be required. Other restrictions apply.

More from this month's issue