Walnut Street Finance Blog

2020 Real Estate Forecast

Posted by Walnut Street Finance Team on Jan 9, 2020 9:08:02 AM

Let's look forward into the 2020 Real Estate Market and see what we can see. Meteorologists have the thankless task of predicting whether we should grab an umbrella or sunglasses as we dash out the door. But they don’t have crystal balls, so you all know how that goes—sometimes you end up in a rainstorm. Just like the weather, we can’t always foresee if the real estate market is going to be stormy, calm or sunny, but there are some trends that can help us determine if the barometer is going up or down.

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Typically, housing trends are intertwined with economic performance. So, sales and inventory can directly correlate to wages and interest rates. Last year, we saw quite a few waves on the economic front. Consumer optimism was high at the beginning of the year, but as the global economy deteriorated, the Feds cut interest rates to prevent a downturn. Confidence has since waned and consumers have been cautious—which will likely continue through 2020. Employment has seen a high, but hiring has slowed, with many industries paring back.

What does this mean for real estate? Despite the fear of an impending recession, people have the money and means to buy homes but it depends on housing supply and demand.

Millennials Are Moving

Buyers born between 1981 and 1997 are now ready to settle down. They’re having children and looking to move out of urban cores into affordable starter homes where they can raise families. They want 1,800 square foot single homes with good schools and great amenities. According to Realtor.com, their down payments are larger than ever and in the coming year they will take out more mortgages than Baby Boomers and Gen Xers combined.

Speaking of these two cohorts: neither generation is ready to move out of their current homes. Boomers are living longer in mostly warm markets; while Gen Xers are still raising their kids and aren’t ripe for retiring. Since these older owners aren’t ready to unload their houses, supply won’t be able to keep up with demand. But more on that in a moment.

Secondary Markets are Desired

So, where are they moving? Although they’re shifting out of the city, Millennials still want the convenience of living near large metropolitan areas. This has led to a rise in Hipsturbia, suburbs with city-like amenities that this group loves—live-work-play neighborhoods with cool community perks. They’re moving to mid-size markets like Charleston, Alexandria, and Asheville, where real estate and cost of living is more affordable.

Supply & Demand

The issue now, is if this huge group of young families is hoping to buy new homes and older sellers don’t want to move, we could hit historic lows on salable housing inventory. (Maybe this is the perfect time for more fix and flip projects!) This, along with very low current interest rates, will hike prices up, especially on the lower end of the spectrum, even though mortgage rates are expected to remain flat at around 3.8%.

Weathering 2020 Buying & Selling

This year looks to bring us low supply and high demand for affordable single-family homes in suburban, cool markets with desirable amenities. Those looking for entry-level houses will have quite a challenge. You may want to consider fix and flip projects in Hipsturbia-like markets to target this tidal wave of Millennials who are looking to buy. If you can time your project quickly and price it competitively, you’ll be sure to hit a sweet spot. 

If you are looking for a loan for your real estate project, let us help you.

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Topics: Real Estate Trends

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