After the unexpected slowdown of existing home sales last fall, most real estate agents had optimism for the 2019 spring market. However, many were surprised by the early spring reporting of mixed housing data (when all indicators should have been positive). Although national stats for spring seemed to be pushing upward, some regional markets did not perform as expected (Mid-Atlantic home sales declined at the beginning of the spring).
Many experts cited a number of factors were to blame for the decrease in sales. Industry experts agreed that the lack of quality homes for sale was a top concern. In hindsight, last fall’s home sale slowdown into spring may just have been an aberration. However, it may also have been an indicator that correctly predicting the housing market is increasingly difficult and subject to local factors. Nonetheless, economists have housing predictions for 2020.
At this year’s National Association of Realtors’ (NAR) 2019 Realtors Conference & Expo (Housing Experts Discuss 2020 Outlook, Housing Innovation at Realtors’ Expo; nar.realtor; November 9, 2019), we heard opposing views about the economic and housing outlook. First, it is not unusual to hear NAR’s Chief Economist Lawrence Yun speak of the housing market optimistically. Although he doesn’t expect a recession next year, he does caution that global economics could impact the U.S. such that it could hamper growth. Yun stated a common assessment by economists, which is that home sale inventory is low. He stated “The U.S. is in need of more new housing …This is an incentive for builders to start more construction. If they do, I think we will have at least 12 consecutive years of economic expansion.”
Contrasting Yun’s economic assessment, Kenneth T. Rosen, chairman of the Rosen Consulting Group, expressed a risk of a recession due to economic trade and politics.
However, Rosen conceded that as long as the job market continues to remain strong, the U.S. economy will likely remain robust.
Speaking of jobs and home sale inventory, a recent market assessment by Ralph McLaughlin of CoreLogic (Homeownership Rate Jumps on the Tail of Low Mortgage Rates; corelogic.com; October 29, 2019) indicated that the recent jump in the homeownership rate is an indicator that there is an “upward” trend in homebuyer demand. The 1.4 million new homeowners in 2019 is taken as a positive sign that buyer demand remains high, and is expected to drive the housing market in 2020. However, just like earlier this year, low home sale inventory and “underbuilding” could damper next year’s home sales stats.
So, demand for housing will be strong next year, but I hear you asking about home prices…
Molly Boesel of CoreLogic reported on home sale price growth and expectations for 2020 (Home Price Growth Regains Momentum; corelogic.com; November 5, 2019). September’s 3.5% CoreLogic’s Home Price Index (HPI) increased slightly from August, which continues the six-month increase of home price growth. The steady increase in national home prices indicate a “regained momentum.” CoreLogic forecasts national home prices to increase 5.6% for September 2020.
The S&P Case Shiller Home price Index (spindices.com) corresponds with current national home price growth with a 3.2 percent September index, which is higher than August’s 3.1% index. However, future home price growth may depend on regional shifts in home sales and job opportunities. Seattle and Las Vegas dropped out of the top four cities, as it was noted the “hot housing markets” are now in the southeast markets of Charlotte, Tampa and Atlanta.
Dan Krell is a Realtor® with RE/MAX Platinum Realty in Bethesda, MD. You can access more information at www.DanKrell.com.