What Will the Housing Market Look Like in 2020?

Whether you’re currently a homeowner, you’re looking to buy a home, or you’re just interested in the development of the economy as a whole, you’re likely wondering what’s in store for the housing market in 2020. For the last several years, the housing market has seen a healthy amount of growth, and across the country, we haven’t seen any major declining events since the economic collapse of 2008.

Will that steady, positive trend continue into 2020, or could a housing market recession be around the corner?

The Next Recession?

One recent Zillow survey polled 100 real estate investors and economists about their opinions on the state of the housing market. Roughly half of all participants believed that there’s a recession on the near horizon, with most of those respondents believing the recession would begin in 2020—possibly as early as the first quarter of 2020.

One of the biggest sources of concern here is federal monetary policy. Experts believe that the Federal Reserve may soon raise interest rates, which could have a ripple effect across the housing market and the economy at large. In response to the 2008 housing crisis, the federal funds rate dropped to record lows, incentivizing more borrowing, more consumer trust, and ultimately more spending. Those rates have remained incredibly low pretty much ever since, resulting in the years-long growth period we’ve seen. Over the past few years, the Fed has gradually attempted to ratchet the rate back up in an effort to combat inflation, and currently, the rate is between 1.50 and 1.75 percent.

More of the Same

Other experts predict that 2020 could essentially be a rehash of 2019; homeowners will see a slow and steady rate of growth in home values, with a small increase or small decrease in the total number of home purchases. There aren’t any major factors influencing a massive change, so it stands to reason we might remain on this current trajectory.

There are some factors that indicate the market could be moving in favor of buyers, such as the fact that bidding wars are declining. But there are also some indicators that the market could be moving in favor of sellers, such as the relatively low inventory and high prices. Overall, it seems the market is well-poised to remain stable.

Location Differences

Of course, the “housing market” on a national level is much different than the housing markets of individual neighborhoods throughout the United States. In the wake of the 2008 recession, some cities were hit much harder than others. Generally, cities with the highest or most overinflated housing prices will suffer the worst effects of a housing crash or recession; in these cases, prices tend to decline by as much as 40 or 50 percent. In cities where price increases were steadier and smaller, a decline would be similarly slow-moving. Plus, even if there’s a broad trend of economic recession across the country, some cities will inevitably still see growth in local housing prices.

Factors to Watch

If you’re concerned about the housing market in 2020, keep an eye on these major motivating trends:

• Federal reserve rates. One of the most important factors according to real estate experts, federal reserve rates could increase or decrease, making it harder or easier to borrow money, respectively. The current presidential administration is pressuring the Fed to keep rates low, but the Fed is interested in raising them to keep inflation in check. It’s hard to tell what they’re going to do next.
• Geopolitical conflicts. World-scale conflicts and political changes may also have an influence over the housing market. Next year, there will be a major election in the United States, and multiple international conflicts are beginning to boil—including a simmering trade war with China. A rise in conflicts and international uncertainty could lead to fewer home purchases.
• Stock market and job statistics. If people don’t feel secure, and if they don’t have money, they can’t buy a new home. If the stock market and broad economic performances start to collapse, and if unemployment begins to rise, it could have a devastating effect on the market.
• Home inventory. Home inventory could also have a strong effect on housing prices; if more people begin to sell, increasing supply, it could drive prices lower overall.

Even the most experienced experts in the real estate industry can’t reliably predict the future of the housing market. As it stands today, the evidence is mixed. There are some factors suggesting we’re headed for a period of decline, but also plenty of evidence to suggest we’re in for more slow, steady growth. We’ll have to wait and see how economic and environmental factors collide in the next year to tell for sure what will happen next.