Heading into 2020, a strong job market and low mortgage rates should bode well for the housing market. But thanks to a shortage of inventory and new listings, the positive real estate trends may turn out to be a mixed blessing.
Golden Age of Home Buying?
Unemployment and interest rates are both at their lowest levels in years. While widespread economic uncertainty in 2019 seemed likely to push mortgage rates north of 5 percent, rates actually declined to an average below 4 percent. In contrast, at the turn of the millennium mortgage rates were averaging 8.5 percent.
The National Association of Realtors Makes Their Predictions
According to the National Association of Realtors, mortgage rates are expected to remain low during the year. NAR chief economist Lawrence Yun says 30-year fixed mortgages will stay below 4 percent and finish the year around 3.8 percent.
Increases in new-home sales are projected to hit a 13-year high of 11 percent, but supply of existing homes will continue to be tight, resulting in a more modest 4 percent increase. Yun calls this a “healthy development for potential home buyers,” as prices will remain relatively affordable.
Despite the optimistic outlook, Yun does offer a word of caution. Increases in economic activity and inflation may trigger a corresponding rise in interest rates.
Real Estate Experts Weigh In
Other experts tend to agree with NAR’s outlook. Realtor.com and Redfin both anticipate tight inventory in the face of strong demand. As a result, the biggest challenge facing buyers will be finding homes, not affordability. In terms of mortgage rates, Bankrate.com chief financial analyst Greg McBride also sees them holding steady at or slightly below 4 percent.
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