Where is Housing Headed in 2020?

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The Biggest Issue Facing Housing Next Year | MyKCM

This coming year, the housing market will be dominated by three things – inventoryinterest rates, and appreciation.  Of these three, the one that will gain more attention than the others is inventory shortage.  There aren’t enough homes on the market for buyers, especially on the lower end of the market. If you have followed my monthly market stats over the last couple of months, this will be no surprise to you.

Based on what is forecasted, we know that interest rates are projected to remain low and that modest appreciation in home prices is expected to continue as we move into the new year.  Additionally, the upcoming election will provoke many unique perspectives on the health of the US housing market and what part it plays in the overall economy. The challenge will be understanding what is actually happening and how you can best position yourself if you are thinking of buying or selling your home.

Here are several perspectives to consider on the inventory issue facing housing next year:

According to realtor.com:

“Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. Inventory could reach a historic low as a steady flow of demand, especially for entry level homes, and declining seller sentiment combine to keep a lid on sales transactions.”

Diana Olick at CNBC:

“Inventory has been falling annually for five straight months, after it recovered slightly toward the end of last year, due to a spike in mortgage rates. Rates began falling again by spring of this year. Homebuilders have been increasing production slowly, but it’s not enough to meet the increasingly strong demand.”

George Ratiu, Senior Economist with realtor.com

“As millennials — the largest cohort of buyers in U.S. history — embrace homeownership and take advantage of this year’s unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish. The housing shortage is felt acutely at the entry-level of the market, where most millennials are looking to break into the market for their first home.”

A Game Plan

The most important thing you can do is understand what is happening in your local market because all real estate is local. You may not be able to avoid some of the issues brought on by low inventory, but you can be educated and prepared.

If you’re a potential seller, engage a qualified Realtor to assist you in pricing your home correctly and provide advice on staging your property so it shows in its best light. Know your competition. Is there a shortage of homes in your price range which means you can potentially be a little more aggressive with your pricing or is there an abundance of inventory (i.e. +$500K homes).

If you’re a potential buyer, get pre-qualified or pre-approved by an experienced lender so you understand your purchasing power. Once again, a qualified Realtor will be able to make some recommendations on whom to talk to. Don’t look at properties first, then speak with a lender. You could be setting yourself up for disappointment. Talking to a lender ahead of your home search will also allow you to move quickly once you find the right home. In this market, that could be the difference between you putting your dream home under agreement or getting lost in the shuffle of a multiple offer situation.

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