2020 Housing Market Predictions

The housing market heated up after the Fed turned dovish in 2019, and in 2020 the momentum is poised to continue, according to analysts.

Among the key housing market predictions for 2020: While house prices are expected to flatten, a mixture of economic growth, high employment and low interest rates should drive demand.

Housing stocks that have pivoted to entry-level homes amid continuing rising demand from millennials are expected to do well.

Housing Market Trends In 2020

A strong economic forecast, historically low interest rates, strong job growth and a regional shortage of homes for sale indicate the housing market in the Puget Sound region will remain healthy in 2020.

Windermere’s Chief Economist Matthew Gardner adds that while job growth did slow slightly in 2019 (and is predicted to slow down a bit more in 2020), unemployment rates have hovered around levels not seen since the late 1960s. All good signs for a strong housing market!

In addition to more millennials acquiring their first homes, CFRA Research’s Global Director of Industry and Equity Research Ken Leon also noted another key driver: baby boomers near retirement.

“They’re downsizing but not just to active adult communities, but also to smaller homes,” he said. “What is called a move-down choice. That is actually creating additional demand for new housing.”

Mixed Picture For Buyers

Realtor.com Senior Economist George Ratiu believes buying a home in 2020 will be a “mixed bag” for consumers.

“It will offer more opportunities for some as the supply of new homes begins to offset inventory pressure, interest rates remain reasonable and home prices flatten,” he said.

However, Ratiu does not think enough homes are being built to address the rapidly growing demand from millennials for entry-level housing.

Gardner agrees that the new-home market was pretty disappointing for most of 2019. “Land prices, labor and material costs, and regulatory fees make it very hard for builders to produce affordable housing. As a result, many are still focused on the luxury market where there are profits to be made, despite high demand from entry-level buyers.”

Builders are aware of this constraint, however, and Gardner predicts a shift as builders do their best to deliver more affordable housing. “I believe single-family housing starts will rise next year to 942,000 units. That’s an increase of 6.8% over 2019 and the highest number since 2007,” he said. “As the market starts to deliver more units, sales will rise just over 5%, but the increase in sales will be due to lower priced housing.”

Qualifying for a mortgage could be easier in 2020 as well, due to stabilizing prices and a relatively low rate.

Should You Buy A Home In 2020?

Buying a home is one of the most important financial decisions a person will make.

A key rule of thumb is to keep your debt-to-income ratio as low as possible. Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. To get a qualified mortgage, the Consumer Financial Protection Bureau recommends a total debt-to-income ratio below 43%.

Another key metric to watch is the price-to-rent ratio, which is the ratio of median home prices to annualized median rent in a given location. As a general rule, ratios ranging from 1 to 15 are low, meaning it’s typically better to buy. Ratios from 16 to 20 are moderate, meaning the advantages of buying are less clear. And ratios of 21 and higher mean it is much better to rent.

San Francisco has the highest ratio in the U.S. at 50.11, according to analysis of Census data by Smart Asset. Los Angeles comes in at 38.59, New York at 36.83, and Seattle at 36.07.

However, I feel confident that 2019 will end with a slight rise in home sales.

“Home prices next year will continue to rise as mortgage rates remain very competitive,” Gardner says. “Look for prices to increase 3.8% in 2020 as demand continues to exceed supply and more first-time buyers enter the market. In the year ahead, I expect sales to rise around 2.9% and the share of first-time buyers to grow, making them a very significant component of the housing market.”

Should You Sell A Home In 2020?

If your home no longer matches your lifestyle, perhaps due to family changes or employment prospects, you may be ready to sell your home in 2020.

Forget about national housing market trends. If you’re thinking about selling a home, you want to know if there’s buying demand in your area.

In good news for sellers, the Puget Sound region continues to see strong demand. 2019 ended with a severe shortage of homes, capping six straight months of decline in our local market. Sellers throughout Western Washington can expect significant interest in new listings.

If you’re considering selling a home in 2020, don’t forget to think about your next one. If you’re upsizing to a bigger home, make sure you have enough equity in your current property to afford it and work with a realtor to prepare for buying and selling simultaneously.

See more of Matthew Gardner’s Predictions & Economic Insights for 2020:

2020 Real Estate Forecast

2020 Economic & Housing Forecast

2020 Mortgage Rate Forecast

Matthew Gardner answers “Will There Be a Recession in 2020?”


A version of this article was published on Investor’s Business Daily by Michael Larkin. 

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