Realtor.com projects that homesellers will be left on the sideline in 2020, as inventory is expected to “remain constrained” and for existing home sales to drop 1.8%. Average home prices are projected to increase by 0.8%.
George Ratiu, Senior Economist, realtor.com, says that 50% of all purchase sales in 2020 will be performed by millennials.
Ratiu said the housing markets was a tale of two halves in 2019.
“In the first six months, we saw the effect of low affordability, which translated into an inventory build-up around the country. The number of homes available for sale rose rapidly, at nearly 7% on a yearly basis, the fastest pace of growth since 2014,” Ratiu said.
He noted the “landscape shifted quickly” as mortgage ranks began falling in March, which provided the housing market with a “second wind.”
“Thousands of buyers that were priced out by sky-high prices found a way to enter the market by leaning on financing, and those that were on the edge of qualifying were suddenly and automatically back in. At the start of this year, 2-out-of-3 of markets were seeing inventory growth. As we wrap the year, only 1-in-10 are seeing growth, placing housing into acute shortage mode,” he said.
Ratiu said that millennials will drive the housing market in 2020, as millennials’ demands in housing have changed over the past decade.
The oldest members of the millennial generation reached 38 years in 2019, and millennials began broadening their horizons beyond downtown centers.
In his forecast, Ratiu debunked some myths about millennials, saying they prefer the 1,800-square-foot home in the suburbs, their down payments are larger than ever, and are expected to take more mortgages than baby boomers and Gen Xers, combined.
Ratiu said sellers in 2020 will content with flattening price growth and slowing activity, “requiring more patience and a thoughtful approach to pricing.”
“Sellers of homes priced for entry-level buyers can expect the market to remain competitive and prices to stay firm. At the upper end of the price range, however, properties will take longer to sell, and incentives will be needed to close deals,” he said.