As the years go by, people seek out new investment avenues. One of the strongest contenders for the best investment opportunity in the next five years is the housing market. Believe it or not, but a resilient job market and low mortgage rates are expected to sustain and strengthen the real estate market in 2020 and the following years.
The unemployment rate has reached its lowest mark in the last 50 years and interest rates are lower than they have been in the past, incentivizing prospective buyers. One of the problems faced by the real estate industry is the scarcity of housing, especially at the lower end of the pricing spectrum. Despite market struggles caused by rising mortgage rates and stock market volatility, sales have improved since 2019.
Investing in the real estate market can be tricky and expensive. But at Zumbly, we’re here to provide you with the resources you need to navigate this challenging endeavor. Here are some trends to know in market prices, rates, and investment strategies.
Related: How to Make an Offer On a House
Trends in Market Prices and Rates
- According to GSE, the home price growth is expected to experience a slowdown over the next few years from an annual growth rate of 3.2% in 2019 to 2.9% in 2020 and 2.1% in 2021.
- Sales of new homes are expected to rise to 750,000 in 2020, which will be a record high in the past 13 years. However, existing-home sales will continue to suffer from the lack of supply and will rise only to 5.6 million sales, which is just a 4% increase over one year.
- The national median of the sales price of existing homes is expected to increase to $270,400, which is an appreciation of nearly 4.3 percent from the past year.
- According to Lawrence Yun, the Chief Economist of NAR, an increase in home-building activities and the resulting growth in housing supply are expected to keep the home price gains under control. This is a promising development for home buyers, especially those buying a home for the first time. It is expected that the market in southern US cities will perform better than the other markets.
Trends in Investment Strategies
- According to the latest data from Mortgage Bankers Association and Freddie Mac, 2019 was one of the best years for refinancing since 2016 and the best year for the purchasing side since 2006. The positive sentiment and excellent performance are expected to continue in 2020 and 2021.
- On the purchase side, it is expected that purchase originations in 2020 and 2021 will amount to $1.299 trillion and $1.369 in 2021.
- Sales of homes amounted to approximately 6 million in 2019 and are expected to rise in 2020 and 2021, to 6.1 million and 6.2 million, respectively.
- It is expected that 2020 will point towards a substantial shift in the market to favor buyers.
Stay in tune with the housing market by using Zumbly home scores.
How can I prepare for these trends?
To properly understand how to use the real estate market trends to your advantage, their impact must be fully understood. For instance, if the market is fluctuating, then investors should take a loan on a floating basis instead of a fixed basis. Also, understanding the economic conditions and their impact on individuals can be crucial in preventing a financial misstep – such as if a recession is expected, then taking a loan is not a good bet.
It is essential to carry out extensive research into the market and how it works. For instance, be aware of government programs that could benefit home buyers substantially, such a first-time homebuyer programs that offer a significantly lower mortgage rate or down payment. Similarly, there are real estate crowdsourcing opportunities in the market that potential investors could look into, without the hassle of tying up one’s liquidity in a physical real estate.
Most importantly, do your research about the properties you hope to buy. With Zumbly, you can narrow down your search to find cash flow positive homes only or even homes with a specific return rate. You can narrow your search by GRM or year built, so you can focus on ewer or older homes depending on what the market is like. You can also search by Airbnb occupancy rate to make sure your short-term rental property purchases are in lucrative areas.
After studying the above opportunities, it is not difficult to read between the lines and make an investment decision.
The predicted trends for the upcoming years show that the real estate market is unlikely to crash in the near foreseeable future. The year 2020 is shaping up to be a great time for real estate buyers to enter the market arena, as there are currently little or no signs of any imbalances that could force their hand to either hurry or pull back.
The overall forecast for the US housing market predicts that the total stock of homes available for sale will remain more or less stable. Additionally, even though it may be a seller’s market in more places than not, it is expected that there will be less competition for buyers to face. Homes in most cities might take a more extended period to sell as well, and price deductions will now become more common in the US real estate industry.