In 2019 we saw a rise in home prices, a fall in mortgage rates, and a surge of refinancing applications. Missed or late mortgage payments reached an all-time low and many Americans were able to see their dream of homeownership become a reality. As we look ahead to a new year, there are plenty of predictions that give us a glimpse into what we may be able to expect for both current and aspiring homeowners. Here’s what we’re thinking 2020 has in store:
Rates Will Remain Low
Mortgage rates were nothing to be excited about in the first half of 2019 with many experts expecting them to rise as high as 5%. This caused a brief slowdown in the market. However, they began to drop several times before reaching a nearly three-year low by September. In fact, mortgage rates averaged 3.9% for the year, the fourth-lowest average since 1971. While they are not expected to fall much more, if at all, it is predicted that they will hover around 4%. For those thinking about buying a home, this is a promising forecast.
Generational Shifts Expected
Several generations will be taking their place in the real estate market in 2020. Perhaps none larger than millennials who are expected to account for 50 percent of all mortgages by the spring of 2020 as this is the year where many will be turning 30, a popular age to become a homeowner. Also, older millennials will be reaching the age of 40, which is a common age to make the move from the city to the suburbs. Baby boomers, however, are expected to hold onto their homes longer than they have in the past. The new year will also bring a new generation entering the housing market for the first time. Generation Z, those born between 1996 and 2010, are expected to purchase their first home between the ages of 26 and 30. Just as those before them, this generation views homeownership as a desirable milestone with 97 percent reporting that they’d like to own a home of their own.
Homeowners Are Staying Put
In 2019, homeowners spent an average of 13 years in their home, up from eight years in 2010. As home prices rise and homeowners continue to gain equity, it makes more sense to remain where they’re at. There are also more options available via refinancing to make homeownership more affordable. For older Americans who may be on fixed incomes, the stability that comes with a fixed monthly mortgage payment is also an incentive to keep their homes. Also, many local governments have policies that help reduce property tax burdens for senior citizens.
Inventory Will Be Tight
Low rates, different generations making real estate moves, and homeowners staying put means the demand for homes is high while inventory is low. It’s predicted that 2020 will bring about the biggest housing inventory shortage in history. While borrowers may be pleased with their home loan options, they may run into a problem finding the ideal property. One reason for this may be because there aren’t enough starter homes on the market. New construction may be the answer to an inventory shortage, but these units tend to be priced out of range for first- time homebuyers. The best bet for those entering the housing market may be settling for a fixer-upper or smaller square footage.
Multiple Offers for Sellers
2020 will be a seller’s market as buyers will have fewer homes to choose from than they have in five years. We can expect bidding wars as homeowners who have been holding on to their property decide to sell. The good news for buyers is that, as houses become available, the balance between supply and demand will improve. It’s expected that approximately one in four offers will face a bidding war in the coming year.
What’s It All Mean?
It looks as if 2020 will be very similar to the second half of 2019. The conditions for borrowers to qualify for a home loan is desirable while finding the perfect home will be tougher to accomplish. Expect younger generations to flood the market while older homeowners stay put, resulting in a stalemate for desirable housing. If you’re considering applying for a mortgage loan in 2020, be sure to find a loan originator who is invested in helping you find the right program for you. At Silverton Mortgage, we know that everyone has different needs regarding home finance and pride ourselves on the personalized service and superior communication that we provide. There’s a good chance that financing your home in 2020 may be the easiest hurdle to overcome as inventory will be tight. Whether your goal for the new year is to buy your first home, move on from your current home, or finally get that vacation home you’ve been wanting, it’s possible with the right tools and some patience.