2020 National Housing Forecast Overview

1. Home price appreciation will flatten. Appreciation is forecasted at an increase of 0.8 percent. By comparison, home growth in Fort Collins is estimated to be 5.5 percent.

2. Inventory will remain constrained, especially at entry level prices

3. Mortgage rates are likely to bump up to 3.88 percent by the end of the year

4. Tight inventory and rising mortgage rates will lead to decreasing sales

5. Buyers will continue to seek affordable housing

Supply and Demand

At the start of 2019, 2 out of 3 national markets were seeing inventory growth. At year’s end, only 1 in 10 markets were seeing growth. The housing forecast for 2020, the market will continue to struggle with an inadequate supply of homes to meet buyer demand, and this inventory shortage has the potential to reach a historic low level.

Nationally, the luxury market is cooling and builders are expected to shift to mid-level pricing. According to Matthew Gardener, economist, builders aren’t keeping up with the demand for new housing stock. This is because of increasing costs associated with land, labor, materials, and government regulation.

“25 cents on of every dollar spent on home construction is regulatory costs,” says Gardner.

Overall, buyer demand will remain very robust, particularly at the entry level. As a group, Millennials (born 1981-1997) will account for more than half of all mortgage origination in 2020.

Home Prices

At the national level, prices are estimated to tick up only 0.8 percent. In northern Colorado, analysts predict an annual average price growth close to the historic average of 5.5 percent because of in-migration and job growth exceeding many areas of the nation.

Housing Affordability

Over the past decade, demand for downtown living increased, driven by the desire of Millennials for proximity and lifestyle amenities. As Millennials mature and start families, they are making a noticeable move toward affordable housing. The desire for affordability will continue in 2020. This is also fueled by Baby Boomers retiring and seeking sunnier weather, lower taxes, and a lower cost of living.

Buyers Housing Forecast

Compared to recent years, buyers have less competition and more leverage. First time buyers will continue to struggle with affordability, even with favorable mortgage rates. Economist Matthew Gardner says 36.8 percent of homeowners in Larimer County and 29.5 percent of homeowners in Weld County have over 50 percent equity of their home value. When these homeowners become move-up buyers, they acquire homes with more of the features they want without increasing their mortgage payment. By doing so, they also add inventory to the market with their home sale.

Sellers Housing Forecast

The flattening price growth and slowing activity will require patience and thoughtful pricing. Nationally, sellers of homes priced for entry level buyers can expect the market to remain competitive and prices to stay firm. At the upper end properties will take longer to sell, and incentives will become more common. Overall, the homes that are prepared for the market and priced correctly will reap the benefits.

How can this year’s market opportunities support your real estate goals? Give me a call and let’s discuss your options!

Source: Realtor.com