Perhaps the most pressing question on any agent’s mind at any given time is: “Where is the market going?” Selling real estate is a career that relies heavily on market trends, so trying to predict the future is not just a hobby, it’s a survival skill!
And while we don’t have a crystal ball, innovations in data analytics combined with good old fashioned experience can go a long way toward identifying trends as they emerge. Here, according to our experts, are six trends in homebuying to watch for in 2020.
6 Homebuying Trends in 2020
1. Recession Jitters, But No Recession
Historically, the real estate market has had natural boom and bust cycles about every seven years. Currently, we’re in a record-breaking boom streak. The end of a growth cycle can be hard to predict, but everyone seems to agree we’re overdue for a downturn.
And while we might not be facing down a 2008-level correction, experts are predicting a slowdown in the next year. The bipartisan Congressional Budget Office (CBO) predicts sharp drop in the GDP next year to 2.1%, and a sustained period of low growth over the next ten.
Still, real estate experts remain cautiously optimistic. “The housing market is poised to continue its historic run, at least for the foreseeable future,” explains Matt Hernandez, Aceable’s Real Estate Subject Matter Expert. “Experts are calling for a recession sometime within the next 18-24 months, but frankly, I've been hearing that since 2016. The truth is nobody knows when it's coming, but it will definitely happen at some point. Until then, however, we're going to see more of the same: higher home values, quick sales, and a strong demand for new housing.”
Predictions from the Urban Land Institute (UIL) echo this sentiment, but their 2020 Emerging Trends in Real Estate Report cautions that when the bust does arrive, “We could be looking at an especially jolting shock to the system.”
2. Slow Growth in a Buyer’s Market
A lot of housing markets saw a growth slowdown in 2019. The Case-Shiller national home price index showed 13 consecutive months of home price slowdowns over the last 18 months. However, to a lot of experts, this looks a market finally evening out.
Christopher Totaro of Warburg Realty in New York says, “In 2020, I see the resale market remaining flat to slight improvement in value recovery in some markets that have, historically, been strong prior to this current market correction. I believe that certain sub-markets of major urban markets will see a 1% to 3% value growth.”
The UIL report also predicts slower but steady growth over the next five to ten years. This trend will continue the buyer’s market much of the country has seen in 2019.
“I believe that a buyer's market will persist for the next few years as sellers who bought at the highs in 2014/2015 continue to come to market with resale inventory at prices that are not in line with buyers’ expectations,” says Warburg’s Catherine Silver Smith. “The disconnect between buyers and sellers will continue to make it difficult to get deals done and the average days on market for a property will likely continue to climb”
3. Low Rates Encourage First-Time Homebuyers
That buyer’s market is great news for first-time homebuyers. The Federal Reserve cut interest rates again in October for the third time in a row, another indicator that first-time homebuyers are going to have it good in 2020. Slower growth gives new buyers an opportunity to get into the market.
“I foresee the mortgage rates will continue to hover at this low level in 2020, incentivizing many — especially first-time buyers — to buy a home sooner rather than later,” says Louis Adler, co-founder of REAL New York.
Smith agrees: “This is a huge opportunity for first-time buyers looking to get into the market with a good cost basis for future resale.”
4. The Rise of Hipsturbia
Millennial buyers famously want to live in cities. People in their 20s and 30s value walkability, public transit, and quirky retail over big homes with big yards. “Younger home buyers want to buy smaller and closer to cities than their parents,” says Hernandez.
However, as this population has children and need a bit more space, and as prices in cities soar, community-oriented growth just outside of cities is trending. In other words, millennials are moving into “cool” suburbs, built as live/work/play communities. Call it the Brooklyn effect.
The UIL report terms these communities “hipsturbias,” and reports they’re on the rise on the outskirts of what they call “24-hour cities:” New York, San Francisco, Atlanta, and Chicago.
Hipsturbias are defined by good public transit, walkability, cool retail, good restaurants and bars, and most importantly, affordability. This type of development is projected to continue to be strong for the foreseeable future.
5. Big Growth in the Sun Belt
The trend of Americans moving south will continue strong through 2020. The UIL’s top four markets to watch are all in the sun belt: Austin, Raleigh-Durham, Nashville, and Charlotte. Other southern cities make the top ten, including Orlando, Atlanta, Dallas-Fort Worth, and Tampa-St. Petersburg.
2020 is predicted to be another big year of growth for these sun belt cities.
6. Smart Homes, Green Tech, and Climate Change
The final trend our experts identified for 2020 is a continuing interest in smart homes, green technology, and a growing concern about mitigating climate change.
Technology and smart homes continue to entice homeowners, according to Hernandez. As this tech comes down in price and goes up in sophistication, “Homes that come equipped with some of this tech are going to continue to be in higher demand.”
Smart tech is also often green tech, from smart thermostats that help homeowners conserve energy to solar panels.
Increased awareness of climate change is causing homeowners and builders to consider how they can mitigate the climate’s effect on home values. Power cuts and wildfires in California are driving interest in off-the-grid and self-sustainable tech.
And the overall community-centered approach of both millennials and retiring boomers creates demand for sustainable living options.
According to the UIL report, this collection of factors — fear of climate change, a feeling of isolation driving by technology, a desire to keep costs down, and a yearning for walkable, livable, sustainable cities — is driving trends toward co-living, hipsturbia, and smart/green tech.
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