Chris’s Real Estate Predictions for 2020
What I Expected To Happen Last Year
Last year at this time the consensus predictions were rising prices and rising interest rates. The expectation was that we would return to a more ‘normal’ market with houses sitting on the market longer than they did in the last few years.
What Actually Happened
What actually happened was that in the hottest markets the frenzy of limited inventory and multiple offer situations continued because interest rates stabilized over the course of the year, and for all but the most challenged buyers, actually dropped. So, while prices continued to head higher, the buying power of well-qualified buyers went up as well.
More Of The Same in 2020
Based on my personal experience and research, 2020 will essentially be a continuation of what we saw in 2019. I expect low interest rates, high demand, and limited supply. The limited supply and high demand will be particularly acute in the lower-priced and entry-level markets where new construction is limited. It is generally more profitable for builders to focus on more expensive higher-priced homes than starter homes.
People Are Staying Put Longer
Prior to the 2008 housing crash, people stayed in their homes for an average of eight years. Today, the average is 13 years, and in some cities, it is much higher than that. This is another contributing factor to tight inventories. You can’t buy what is not for sale.
Other Contributing Factors
Thanks to the historically low interest rates buyers are able to lock in today, there could be less incentive for home-owners to move in the future as well. Further compounding the problem, data from the National Association of Realtors and Reatlor.com show that Millennials are very active in the market, while Baby Boomers and members of Generation X are sitting tight. This could be a short term anomaly or it could be a long term result of people living and working well past traditional retirement age.
The 2020 Election Year Wild Card
2020 is a presidential election year. While I have not seen independent data, since earning my real estate license in Ohio in 2001, I have worked through four presidential election cycles. This year will be my fifth. Every year I have seen markedly less activity in the second half of a presidential election year versus the first. There is good reason to believe this will happen in 2020 as well. Consciously or unconsciously, buyers are less likely to sign up for a new 30-year mortgage when potential political and economic upheaval is in the air.
iBuyers Will Be A Thing Everywhere
From www.OpenDoor.com:
An iBuyer is a company that uses technology to make an offer on your home instantly. iBuyers represent a dramatic shift in the way people are buying and selling homes, offering in many cases, a simpler, more convenient alternative to a traditional home sale.
How iBuyers operate varies, but the underlying idea is that a company estimates the value of your home and makes an offer. If you accept, they take on the burden of owning, marketing, and reselling the home. Depending on the service you choose, the benefit is the certainty of an all-cash offer and more control over when you move.
As you can imagine, the advent of this reality has a lot of real estate agents in panic mode. My take is that iBuyers and online mortgage lending are trends that are here to stay. I don’t think these will ever be the majority of transactions closed, however.
I’m going to throw a wild guess out there that within 10 years these will be no more than 20% of all sales. And, they will be the easy ones. There will always be a need for a skilled professional, advocate, and advisor to guide buyers and sellers through the life transitions that include buying and selling real estate, The iBuyer trend will ultimately thin the ranks of the Realtor community, leaving only the true professionals to thrive.
My Advice
As real estate professionals, we must work to improve our personal capabilities and the capabilities of those on our teams. We must continue to add value in the marketplace in order to remain relevant in an increasingly digitized world where everyone wants to do the easy stuff. Learn to do the hard stuff. Your clients will appreciate you all the more.
