Did you know that we’re in the midst of an economic expansion – and it’s the longest expansion in our history?
As we bustle through our daily lives, sometimes we lose sight of that fact. And economists think there may be even more growth ahead, as indicated in a recent survey by the National Association for Business Economics.
But as we all know, recessions are not only a natural part of the business cycle – they’re necessary. And whether you currently own a home, or are thinking about buying a home, you’re right to wonder how a recession would impact the real estate market this time around.
There’s no doubt about it – the last recession hit homeowners hard. That “Great Recession” of 2008 led to a dramatic decline in housing prices.
It’s important to remember that recession wasn’t “typical” recession. It was, in fact, the worst economic downturn since the Great Depression of the 1930s!
Most Americans assume that a recession means a decline in home values. However, an analysis of home prices during five previous downturns show that only twice has that happened – in 2008 and in 1990 – and in 1990 the downturn was less than 1%. The other three downturns in the economy actually saw increases in home prices!
Let’s take a look at our crystal ball and see what experts are predicting for real estate in 2020 (and beyond).
PRICES WILL CONTINUE TO RISE
Property data firm CoreLogic is forecasting a faster rate of growth in 2020 than we saw in 2019. Their data shows that the biggest gains will be in the lower end of the market. Low interest rates, coupled with a shortage of “starter homes,” is part of the challenge here. Builders have higher profit margins on more expensive homes. As a result, they’ve focused less on building entry-level homes.
What does it mean for you?
If you want to buy a home now, and can qualify for a mortgage, don’t let fear stop you. With expectation of prices rising, the longer you wait the more you will likely pay.
INVENTORY LEVELS WILL REMAIN LOW
Americans are staying in their homes longer. In 2010, the average homeowner lived in their home eight years. In 2019, that figure jumped to 13 years. That’s a dramatic difference!
In areas where land is available, new construction could offer relief. The National Association of Realtors (NAR) is predicting over one million new housing starts this year – that’s the highest level since 2007. However, many communities simply don’t have the land available to support new housing.
What does it mean for you?
Be prepared to compete, regardless of the price point you’re looking at (but especially in entry level price ranges). Work close with a real estate agent and a mortgage lender to be sure you can make a competitive offer – and be sure you understand what that means in today’s market.
INTEREST RATES WILL REMAIN LOW
We continue to be blessed with some of the lowest mortgage rates in our history. Rates have declined more than a full percentage point since November of 2018. At that point, they peaked at 4.94%. Clearly this isn’t any kind of historical high (hello 1970s!) but that’s as high as we have seen rates in recent years.
Rates around 3.7% are predicted through mid-2021 by the Mortgage Bankers Association. But don’t be lulled into a false sense of security with regard to the interest rate environment. Interest rates can be affected by many things – including election results, domestic economic factors, or international events.
What does it mean for you?
Buyers should act soon to lock in what could be a historically low mortgage rate. Doing so has two benefits: 1) you can minimize your monthly payment and save thousands of dollars over the term of mortgage, and 2) you can qualify for more home (a more expensive home). And if you are that rare homeowner who is planning on staying in their home and has not yet refinanced, now is an excellent time to do so.
MILLENIALS WILL DRIVE THE MARKET
Millennials are becoming a driving force in the real estate market. In just a few years, they have gone from being a small percentage of the buyers to a much more substantial position. In 2020, millennials are expected to account for more than half the mortgages taken out!
Millennials are reaching the age when they are beginning to have children or grow their existing families. And with home-buying decisions often driven by family change, it should be no surprise that millennials will be purchasing homes in record numbers.
While the first wave of millennial buyers was drawn to urban centers with access to work, restaurants, and retail many millennials are willing to trade the accompanying high prices, small sizes, and lack of good schools for a life in the suburbs.
What does it mean for you?
If you’re a millennial ready to change your lifestyle, you’re in good company. With rates predicted to remain low is a great time to make a move. If you’re a homeowner who is thinking of selling, give us a call. We are skilled at marketing to this growing millennial segment and can help you get the best possible terms for your home.
SUCCESSFUL MOVES REQUIRE PREPARATION
While a national overview provides a big picture outlook on the market, real estate always has been (and always will be) local – and sometimes hyperlocal.
As the local experts in Kent, Covington, Maple Valley, and Renton communities of Washington we are skilled at guiding you through the complexities of the area we’re the market leaders in. One of our mantras is this: successful moves require preparation.
So if you’re planning on a move this year, start preparing today. Here are a few ideas.
Buyers:
- Get pre-approved for a mortgage. We work with some of the best ones out there and would be happy to refer you to someone who will take great care of you.
- Create your wish list. Be sure to differentiate your “wants” and your “needs” so we can create a search that will uncover the best possible matches for you.
- Schedule time to talk with us. Whether we do that at our office, on the phone, or online we find it makes for a smooth and successful process.
Sellers:
- Call us to schedule a visit to your home. We can provide a no-cost, no-obligation analysis of your home’s value. Just as importantly, we can help identify potential repairs or upgrades that could maximize your sale.
- Prep your home properly. Most buyers want a turn-key property. We can help you determine how to make that a reality.
- Declutter now! Almost every home we visit needs to have personal items, out-of-season clothing, and some portion of the home-owners’ belongings removed prior to going on the market. This always takes longer than expected, so we recommend you begin this process early.
As always, we welcome your questions or comments. Every buyer and every seller has a unique set of circumstances, dreams, and goals. Our experience allows us to help you figure out the best course of action based on anticipated market conditions and your desired result. Give us a call today so we can help!
