Tuesday, November 5, 2019 / by Sharyn Younger
2020 Outlook For The Housing Market
We had the good fortune to attend a presentation by Dr. Lawrence Yun, Chief Economist at the National Association of Realtors. His topic of course, was the 2020 outlook for the housing market. He adeptly explained the positive conditions and the threats to our economy that support his expectation that the 2020 outlook for the housing market shows it will be a good year for home owners, home buyers and home sellers. Ask any Realtor how the market’s doing and you’ll often hear it’s a great time to buy; a great time to sell. But ask them to explain why and you will often hear a lot of stammering and stuttering as they try to explain what may or may not be an accurate assessment of the current state of the market. I much prefer to understand the real estate market in terms of positive conditions and threats. It provides a simple analysis and allows the reader to draw his or her own conclusions as to whether or not it is the right time to buy, sell or hold. Predictions are great, however they also provide a 50/50 chance of being wrong. Here are the main takeaways from the 2020 outlook for the housing market:1. The economy is doing well and housing is chugging right along with it. All of the economic indicators show that we are not in a housing bubble and that there is room for appreciation in many markets, including Arizona. We are in the midst of the longest economic expansion in US history which began in 2009. And although we are seeing some slowing and there is talk of a possible recession, there is no reason to believe that it would markedly change the state of the housing market. For those who believe that after 10 years we are due for a correction, you’ll be happy to know that Australia is on its 20th year of economic expansion. We may have quite a way to go and that bodes well for the 2020 outlook for the housing market.
2. If a recession does occur, we are in a much better position to withstand depreciation because far more home-owners have sizable equity in their homes than during the last recession when so many homes were under water.
3. Consumer confidence, one of the key indicators determining willingness of consumers to make a large purchase, remains high.
4. We are seeing great numbers in unemployment. Particularly in Arizona, one of the top states for in-migration, jobs are aplenty. Not only Californians are coming into our state….so is business. And with them they are bringing lots of job opportunities. Great news for the 2020 outlook for the housing market.
5. A comparison of the housing market in 2000 vs 2019 shows that almost every benchmark shows improvement: affordability, mortgage rates, population, number of households and jobs. The only variable that is worse in 2019 is total home sales. Again, inventory, lingering fear from the housing crash, student debt and other factors have negatively impacted the number of homes sold, although that impact is fairly small.
Those are all of the positive indicators. What about the potential threats to the 2020 outlook for the housing market? Well, there are a few:
Business investment in the US is decreasing. Despite the fact that after-tax corporate profits are increasing significantly, companies are holding onto those profits and not investing heavily in the US. To underscore that threat, commercial Realtors have reported slower leasing activity in 2019 The trade war. You may have noticed that every time rhetoric about the trade deficit and tariffs heats up, the stock market dips. And when the talk is about getting closer to a trade deal, the stock market goes up. That’s because a trade agreement is good for the US (and China) and decreases uncertainty along with consumer prices. A trade war on the other hand wreaks havoc in the economy and often results in higher prices, fewer jobs, and great uncertainty. That is the elephant in the room as we have no idea in what direction we are headed in that regard.
Despite those threats, the 2020 outlook for the housing market looks like a continuation of 2019…and 2018….and 2017, etc. Mortgage rates are expected to remain low, downpayment assistance programs are making it more affordable for first time homebuyers to own a home, Arizona is seeing new homes cropping up throughout the valley, and in-migration of business and people is expected to remain high. We will be watching closely what happens with the trade war and will keep you posted!