Although housing inventory in several regions across the U.S. is still low, some markets are starting to see a shift that favors buyers. However, low inventories usually prevent housing markets from shifting towards buyers completely, so it is too early to say if 2020 will be a true buyers’ market.
Many economists believe 2020 conditions will favor homebuyers depending on how conditions in supply and demand change. However, the consensus favors buyers. Here are a few more predictions for the 2020 housing market.
Home Prices
Over the past year or so, home prices have started to slow down. In the past few years, home prices were accelerating so fast that many prospective homebuyers stopped looking for a house to buy. They were essentially priced out of the market. Since then, prices have stalled, and many economists and real estate gurus believe that trend will continue throughout 2020.
Over the last 12 months, the median home value in the U.S. rose around 7.5 percent. Projections for 2020 show the median home value will rise around 5 percent in 2020. Additionally, markets that were once “white-hot” are now cooling off at a rapid pace.
Affordability
One of the biggest problems facing the housing market in 2020 is affordability. Home prices rose so fast over the last few years that many Americans could not afford to buy a house. Although interest rates remain at historic lows, it may not offset the price of homes for sale in the U.S. Low-interest rates in 2020 may not be enough to offset affordability and could ultimately keep homebuyers on the sidelines.
The Federal Reserve and Politics
How the U.S. Federal Reserve shapes monetary policy in 2020 will also affect the housing market. A stock market correction, the potential for a recession or geopolitical issues could force the Fed to take dramatic measures. Some economists speculate a recession would spell disaster for the housing market. Pundits speculate the Fed may need to take measures that are similar to what it did during the housing crisis of 2008, which included buying defunct mortgage-backed securities that were sitting on the balance sheets of banks and investors.
However, most economists forecast any potential recession or problem with the housing market would not approach the severity of what occurred during the Great Recession.