Tight inventory and flat prices headline realtor.com’s 2020 housing forecast. “I think the biggest surprise from the forecast is how long the market is staying in this low inventory environment, especially as Millennials are in a major home-buying phase,” observes Danielle Hale, chief economist at realtor.com. The report forecasts inventory levels to fall to their lowest since 2015. Key takeaways from the report, “sellers will contend with flattening price growth and slowing activity with existing home sales down 1.8%.” Nationwide you can look to flat home prices with an increase of less than 1%.”
The news isn’t too bright for both buyers and sellers in many markets around the country. Historically low inventory will create bumps in the housing road especially for buyers in that affordable/entry-level market. The reasons behind the inventory numbers. “Inventory is so low because we are not seeing a lot of sellers coming to market for various reasons. The Gen X buyers are content to stay where they are for the moment,” Hale explains. “With existing homes, baby boomers have a lack of real reasons to sell. They are living longer healthier lives and aren’t rushing to downsize right now,” she adds.
The result is market lockup. Add in uncertainty thanks to an upcoming election, impeachment hearings combined with a weakening global economy. Despite inventory shortages don’t expect to see the bidding wars and multiple offers of a few years ago according to Hale. “I don’t think the market will have that same frenzy we saw before.”
Selling prices remain almost flat around the country. Even looking at the Washington DC market which had a slight bump up thanks to Amazon naming it for its HQ2 headquarters, prices there are only up 2.6% year-over-year. New York is flat while Boston has seen a paltry 1.2% sales price increase year-over-year. Moving to the west coast, Hale points to the Bay area as “also flat.”
Here’s news you can use for sellers and buyers. Secondary markets look stronger for 2020. “Sellers across the board in the Mid-West and the South stand to benefit the most in 2020 in those affordable entry price points. That’s true even in big coastal markets,” notes Hale. Those market dynamics could increase inventory also benefitting buyers.
The only sector that may see a market frenzy with fundamentals that define a truly competitive market, “are move-in ready lower end affordable properties in the South and Mid-West,” said Hale. She’s talking about the Carolinas, Georgia, and Florida on the east coast. In Orlando, a fast-growing market for Millennials looking to get into the market, a 3-bedroom 2-bath home with a fenced yard is on the market for $232,000, well below Orlando’s median listing price of $275,000 according to realtor.com.
Look to Ohio, Indiana, and Kansas for affordable options for Millennials. Cleveland, Ohio an up and coming city with good lifestyle amenities has a median listing price of $135,000. In Cleveland Heights, a Cleveland suburb, a 1,394 square foot single family home with hardwood floors, remodeled kitchen with granite countertops and marble flooring is currently listed for $114,900.
If you’re looking to buy in in the luxury segment ($1milion and above) in 2020 expect to see additional softening resulting in stronger buying power across the board. If you’re paying cash use that bargaining power for negotiating a good deal.
Check back a few months into 2020 to see where the market is in real-time.