Though trends are just predictions, they still are worth knowing. The predictions below come from multiple data sources, revealing the general directions the real estate market is consistently moving toward overtime. Note that these trends are current as of March 2020.
National Economy Remains Unpredictable
With 2020 being a presidential election year, the political climate’s influence on the national economy remains unknown but likely will play a significant role. Historically, the October and November before the presidential election witnesses a decline in home sales, which usually rebounds in December. The more uncertainty the election outcome will be, the more volatile the housing market.
Also uncertain is the longer-term impact on the national (and global) economy from the pandemic COVID-19. Though many markets have yet to observe any impact on the housing market in their areas, the effect of the COVID-19 emergency in regions hit hardest by the coronavirus, such as California, is already apparent. With shelter-in-place orders in effect, quarantines of the sick, demands for social distancing, and layoffs in several industries, some sellers have withdrawn their listings and buyer demand has lessened. The duration of the pandemic remains unknown, as does the length of the coming recession.
Millennials Continue to Impact Demand for Housing
In 2020, the oldest members of the millennial generation turn 39. Nearly 5 million millennials turn 30. With age comes a greater interest in owning a home. Combined with other market and socio-cultural forces at play, millennials will seek homeownership in greater numbers. As rents in several markets continue to climb, more millennials will answer the rent vs. own debate with a willingness to dive into homeownership. A Realtor.com survey found rising rents were the influencing factor for 23 percent of millennial homebuyers who decided to buy instead of rent. Demand for housing will continue to outpace the available supply of housing, though, especially housing in the affordable range.
Boomers Choosing to Stay in Their Homes
In 2020, it’s expected that more baby boomers (born between 1946 and 1964) will choose to live in their homes, aging in place as long as possible instead of moving to retirement communities or until the housing market seems to be more promising, according to Housing Wire. Boomers lack monetary incentive right now, since their home value has not increased as expected and likely will increase just 0.8 percent this year. Sales of existing homes are predicted to drop 1.8 percent, shrinking the available supply.
Since older generations are more vulnerable to the COVID-19 virus, they have been advised (or ordered, depending on location) to stay at home away from groups as much as possible. This also leads to more boomers holding on to their homes, at least for the duration of the emergency.
City Dwellers in Expensive Markets Migrating Away
Some of the most expensive housing markets, such as New York, Los Angeles, and San Francisco, might be facing a mass migration away from these cities in favor of smaller, less-expensive cities, according to Realtor.com. Many young people seeking to buy their first homes migrate to Arizona, Nevada, Texas, Georgia, Florida, and the Carolinas.
Nontraditional Home Buying Options Expanding
Though the traditional methods of home buying — either paying entirely upfront in cash or securing a mortgage, with a downpayment — still reign and make up most home purchases, less conventional methods continue to gain traction. One nontraditional option for buying or selling a house is the use of an iBuyer. iBuyers incorporate technology and artificial intelligence that enable them to make immediate offers on properties. These fast cash sales are much more convenient for sellers. After the sales, the iBuyers make any necessary repairs and improvements before reselling. Though only one out of every 100 homes sold during the last quarter of 2019 occurred through an iBuyer, this is nearly twice as many than the prior year. Some metropolitan areas in the south and southwest regions of the country find iBuyers represent a fast-growing portion of the housing market.
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