We can all agree that 2020 has been an unprecedented, challenging year. While the pandemic has impacted every aspect of American life, one can’t help but wonder if the housing market could be the next sector to suffer.
Without a magic crystal ball -which unfortunately even the best real estate investors like Housing Solutions REI don’t possess- it is impossible to predict anything with certainty. However, economists who have studied the market and the history of various economic trends believe a housing crash is unlikely.
Read on as we explore the factors that have reassured economists, Realtors, and investors about the safety of the current housing market. To help us better explain the housing market, we will look at three current real estate trends that impact this “looking to sell” market in 2020, and share some insider tips, as well.
Real Estate Trend #1
Home prices have continued to rise in 2020, albeit more slowly than in previous years. The growth trend is still positive, just slower than any year since 2013. This slower growth trend is due to the early impact of the pandemic and market uncertainty.
By the middle of May, home prices climbed back up from 0.6% in April to land at a 3% growth rate. This improvement indicates there’s still a chance that home prices might gain some additional momentum before the end of the year.
According to Chief Economist Lawrence Yun of the National Association of Realtors, home prices could rise back up to a 4% overall growth rate in 2020. Yun also believes that the market will have a great rebound effect after the virus is more contained. Therefore, we will most likely see home prices continue to rise, just at a slower pace than in the previous few years.
One of the biggest variances we’ve seen impacting growth rates is the change in the mix of inventory on the market. This is because metropolitan and more expensive real estate areas are being hit the hardest with the economic impact of the virus. Earlier market uncertainty also led to a decline in new listings.
As a result of market fluctuations this spring and summer, sellers of high-priced homes are choosing to take their houses off the market instead of opting to wait it out. The Northeastern and Midwestern U.S. saw the largest drops in new listings and were also the hardest hit by the virus.
Additionally, although many banks are working with homeowners impacted by the pandemic to avoid foreclosures, we may see an increase in sellers choosing to sell to cash buyers. Some of the fallout of the pandemic, including both loss of income and the more tragic loss of life, may lead to more people looking to sell their homes without investing in traditional methods, like fixing up the home and letting it sit on the market. In this case, a home-buying company like Housing Solutions REI can be especially helpful!
REI Pro Tip: Keep an eye on home price growth rate as it can help guide your decisions whether you plan on buying or selling a house soon.
Real Estate Trend #2
Look around on any search engine or banking website and you’ll find that mortgage interest rates are incredibly low right now. Great news for both buyers and sellers!
Interest rates have been trending downwards even prior to COVID-19 hitting our shores. Last May, the average mortgage interest rate for a fixed 15-year term dropped to 2.69%, which is the lowest the market has seen since 2013.
Most economists agree that interest rates will continue to hover around the lower end of the spectrum until the economy rebounds. We probably won’t see a complete bottoming out of interest rates because even if home sales slow due to the pandemic, lenders will still receive high demands from homeowners to refinance their mortgages at these lower rates.
Lower interest rates can make things less expensive if you plan to buy a new home and may also make your home more enticing to buyers if you’re looking to sell. However, if interest rates begin to creep up again later this year, you should anticipate keeping your house on the market for a longer period.
A reliable and experienced company such as Housing Solutions REI can help you set realistic expectations about the home selling and buying process. Housing Solutions REI can specifically be of service if your goal is to sell your home for cash. Our trained, caring staff will help you understand how to set your home price whether you opt to sell for cash or go a more traditional route, in which case we can help you understand how long you will need to wait for the best offer.
With rates at the lowest we’ve seen in years, we encourage buyers to consider a conventional 15-year fixed rate mortgage instead of the traditional 30-year term. Additionally, our dedication to quality service means we help buyers avoid loans that ask you to pay extra fees and interest, such as such as VA, USDA, and FHA mortgages.
REI Pro Tips: As a seller, conducting a market analysis to find out what other homes are selling for in your area is a good way to get a fair price for your home. And as a buyer, never agree to a home loan with monthly payments higher than 25% of your gross monthly income.
Real Estate Trend #3
Most current home buyers are Millennials, adults ranging in age from about 25-40 years old. This group represented 38% of buyers last year. With the median home price in the U.S. landing at $320,000, we are seeing a stable market for older sellers and younger buyers looking for family homes.
These Millennial buyers are internet savvy and do their homework before making a purchase, especially an investment as large as a home. Below we’ve laid out some seller tips geared specifically to attracting Millennial buyers.
REI Pro Tips:
- Upgrade your online listing by investing in high quality listing photos or a digital home tour.
- Highlight benefits such as available floor space, easy commuting, and proximity to schools.
- Mention popular features like laundry rooms, walk-in closets, patios, pantries, or balconies.
Three Housing Market Factors to Consider
In summation, while we don’t foresee another major housing market crash, there are some important factors to consider when buying or selling a home.
Home equity levels aren’t likely to decrease before the end of the year. However, both the 2020 Housing and Mortgage Market Reviews agree, home prices will continue to rise over the next couple of years.
Keeping track of how much your home is worth is a good way to make sure your equity is still holding steady or increasing in the market. Being aware of possible repairs will also help you best gauge if you’ll want a cash offer or try for a more traditional approach, should you choose to sell.
2. Crash Exempt
The real estate market is not heading toward an imminent crash – not by a long shot. While there’s never a guarantee the market won’t cycle downward again in the future, there are no signs of a true crash coming.
Low mortgage rates in today’s economy are tempting buyers to venture into the market, driving selling a home demand. However, with a low supply of home listings on the market, buying will remain competitive and fuel home price growth.
3. Listing Locations
Buyers are essentially interested in all locations. For example, a potential home buyer may choose your location due to a job relocation or schooling options for their children. Therefore, your home doesn’t necessarily need to be in posh Beverly Hills or The Hamptons to sell in today’s marketplace.
Additionally, since home prices have experienced rapid growth over the last couple of years, some buyers are less selective. Determined buyers are willing to consider neighborhoods that don’t have access to highways or aren’t close to big cities.
If you think your neighborhood is unpopular or believe buyers would not want your home, think again! Now may be the perfect time to sell your house and contacting Housing Solutions REI can make it happen.
Whatever your housing needs, whether buying or selling, rest assured that 2020 is still an effectively stable housing market. The experts at Housing Solutions REI are always available to help you make the best, informed decision for your current property or home buying goals.