The real-estate market tends to dictate the health of the overall economy. With 2020 just begun, everyone is waiting to see what the new year will bring forth in terms of real estate trends. One of the main factors that investors consider is the ‘status quo’ between buyers and sellers.
This status quo is known as either a ‘buyer’s market’ or as a ‘seller’s market.’ So what will 2020 and beyond bring? Using our superior forecasting skills at Zumbly, we’ll give you the answer to this question.
Related: How to Make an Offer on a House
What is a buyer’s market?
Simply put, it is a buyer’s market when there’s more supply than demand. When it is a buyer’s market, the typical scenario is that homes have been listed for a long time, without a sale taking place. This encourages sellers to sell their properties at lower prices. Therefore, if it is a buyer’s market, buyers get a great deal when they purchase a new property.
What is the market like now?
As of fall 2019, all the indicators signaled a shift from a seller’s market to a buyer’s market. The typical sentiment among buyers is patience and perseverance. Despite lower mortgage rates, most buyers are willing to take their time making a decision. This has led to more and more houses being put on the market with fewer buyers ready to make a decision.
According to CNBC, “Just more than 10% of offers written by Redfin in August faced a bidding war, according to the brokerage’s monthly survey. That is down from 42% a year ago.” If this were a peak seller’s market, the percentage of bidding wars would be much higher. Statistics like these signal a shift from the seller’s market to a buyer’s market.
Will 2020 be a buyer’s market?
This brings us to the current year of 2020, which indicates the beginning of a buyer’s market. Many statistics lead to this shift; it portrays the current scenario in the housing market and the parameters that determine the status quo.
The Number Of Houses On Sale
For these past years, the number of houses on sale has been consistently dropping. “For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market,” said economist Aaron Terrazas. One of the most significant indicators of a buyer’s market is this number being stabilized instead of increasing in 2019. There has been a slowdown in the home inventory in 2019, which clearly signals a strong shift towards the buyer’s market in 2020.
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Seller’s have always had the upper hand in the real estate market for a while now, the reason behind this lies in the steady appreciation of home-value. The value has been on the rise since 2017 and 2018. However, growth is slowing down. Home-value growth is slowing in more than half of the nation’s 35 largest metros, and price cuts are becoming more common.
Does This Mean It is A Buyer’s Market in 2020?
While all the signs signal a shift, the market is very much a seller’s market, at least in most cases. Even with slow appreciation, the sellers still hold dominance in the market, specifically in the affordable housing sector. It’s important to remember that no two housing markets are the same. Many experts believe that the Midwest will enter the buyer’s market before the rest of the country. 3/4 economists surveyed estimate that the national housing market won’t shift to a buyers market until 2020 or later.
While all of these trends do signify the beginning of a buyer’s market, it will most likely be towards the end of 2020, rather than the beginning. Sellers still have an upper hand because of rising home costs and despite lower mortgage amounts. 2020 will be a transitional phase between a seller’s market and a buyer’s market, with the possibility of it swinging either way (although not completely). Many factors play into the status quo, and these factors are constantly changing because they’re often controlled by external elements such as tariffs and trade wars.
Predictions for 2020 and beyond
Among experts, the largest share (43 percent) said the national housing market would shift decidedly to a buyers market in 2020, followed by 18 percent that said it would shift in 2021. Experts believe that the housing market will see a dip in growth in the coming years. From 4.2 percent in 2019 to below 3 percent from 2020 to 2022.
According to The Washington Post, “New-home sales are expected to rise to 750,000, an 11 percent increase that puts them at a 13-year high. Existing-home sales will continue to be held down by lack of supply, rising modestly to 5.6 million, a 4 percent increase. The national median sale price of an existing home is expected to grow to $270,400, an increase of 4.3 percent from 2019.”
According to Realtor.com, Tight inventory and rising mortgage rates will lead to dropping sales, and the stock will remain constrained, especially at the entry-level price segment.
Both these reports signal both increased sale prices and a slight upper hand for buyers due to inventory constraints.
What does this mean for my investing strategies?
As an investor, it is essential to analyze the health of the real estate market. Many Millenials have entered the housing market or will enter the housing market in 2020, which means that there will be considerable demand in this sector.
Therefore, it is vital to understand the detailed dynamics of the local housing market. There has always been a seller-dominated market, and while the trend won’t change drastically, it will be shifting to favor the buyers. “While ongoing supply constraints are reinforcing the floor on home prices right now, the experts’ forecasts still imply the joists will start to crack sometime next year, and result in sub-three percent annual home-value appreciation in 2020 and beyond,” said Pulsenomics® Founder Terry Loebs.
Therefore, as an investment, the housing market will be a strong bet in 2020.
2020 will be a transitional year for the real estate market. With experts predicting a buyers market in either 2020 or 2021, the signs point to a mixed market. The implications for you depend on your state and local real estate market.
Whether it is a buyer’s market or a seller’s market in 2020, the opportunistic real estate investor has plenty of opportunities to make the most out of this transitional year.
Related: How Long Does it Take to Buy a House?