Housing Market Trends
When it comes to making any sort of move in the real estate company, looking at market trends can provide you with a lot of insight. So, what do low mortgage rates, high demand, and leveling out home prices mean for buyers, sellers or holders in 2020?
The first thing to note is that the demand for housing is linked to economic growth. Increases in wages, consumer spending and employment are all good news for the property market. This is because when families have better jobs and higher wages, they typically have more money to invest in real estate. While on a global scale, economic growth is showing signs of a decline, the Federal Reserve has stated that they plan to give the US economy a boost by not raising interest rates.
In 2019, mortgage interest rates dropped quite significantly, making the cost of borrowing money to purchase a home much cheaper. Homeownership became more affordable and increasing numbers of people started to qualify for mortgages. Mortgage rates remain historically low. In January 2020, the average rate was just 3.7%. Contrast that figure to the 17% figures we saw in the early 1980s.
When it comes to consumer debt figures, household budgets remain the healthiest they’ve been for over 4 decades. This means that households are spending less of their disposable income on repaying various debts, such as auto loans, personal loans, and credit cards, so they are in a better position to purchase a home. The current consumer debt figures are a long way away from figures following the financial crash in 2008. Spending less paying back debt is one of the main signs of strong financial health.
However, when it comes to consumer debt, it’s important to know that most figures don’t include student loan debt. Student loan debt is now at record levels and is having a big impact on millennials looking to get onto the property ladder. Millennials are all those born between 1981 and 1997.
An estimated 4.8 million young adults are going to reach peak home-buying age in 2020. And, the number of Millennials applying for mortgages is projected to surpass the number of Baby boomers and Gen X combined. This is likely to have a big impact on those looking to buy a home as there will be more competition.
Comparing 2020 to 2008
Positive trends in economic growth and unemployment figures can of course reverse, but many of the factors that caused the massive housing marketing crash in 2008 are not present. For starters, lending regulations are now much stricter and the number of people defaulting on their mortgages is at a 10-year low. Secondly, households have less consumer debt and more disposable income in relative terms than they did have in the period leading up to the 2008 crash. Finally, the supply of housing is a lot lower today than in 2008 when “over-building” was widespread.
If the reason you are worried about purchasing a property this year because of fear of a housing market crash, it would be advisable to limit your property search to home slightly below your budget. Look for properties you can comfortably afford. For the cautious, now is not the time to try to forecast the market with a view to overextend your finances.
Homes Are More Affordable
Housing affordability is now back at average levels. This should be welcoming news for buyers looking to get the best deals as well as sellers hoping to see more buyers in the market. Despite better affordability, many first-time buyers are still finding it challenging to enter the market.
Over the course of the past half-decade, home prices have risen significantly, yet the number of properties for sale has declined. As a result, prices have increased beyond the reach of many first-time buyers looking for affordable starter homes. That said, many single-family homes are under construction and there are expected to be over 1 million added to the market in 2020. It will, of course, take some time for new builds to influence the housing market. So, if you are looking for a home in a competitive neighborhood, you should expect bidding wars.
Hopefully, this article has provided you with some tips and insights for successful home buying and selling in 2020. We mainly discussed some of the factors that impact the health of the housing market, including consumer debt, interest rates, age group populations, and supply. Market trends should not be the only thing you take into consideration when planning your next move with regards to real estate. You also need to make sure you make the best decision for your circumstances. Time is often short, so sometimes waiting for the market to hit perfect conditions for you to buy or sell a home is infeasible.