Now that we’re almost 2 months into 2020, you may be wondering what the remainder of the year will hold for the economy and the housing market specifically. Let’s start with the economy as a whole–and don’t worry, it appears things are looking up! Stocks picked up right where they left off in 2019 by touching all-time highs. And Bonds, which also performed well in 2019, continue to hover near three-year highs, keeping home loan rates near 3-year lows.
Here we present three economic trends to watch for the remainder of the year:
Don’t fight the Fed. As the saying goes, there doesn’t appear to be any chance of a Fed rate hike in 2020. The economy is strong, but not too strong. Plus, the Fed is fighting disinflation, so a rate hike would counter those efforts. Moreover, it’s a presidential election year and the Fed has historically tried it’s best to avoid any monetary policy moves in those years.
Bottom line: good for Stocks and less good for Bonds.
Stock gains. Post-World War II, Stocks on average have gained 10.1% in presidential election years where the incumbent is up for re-election. It’s tough to fight that trend, even with Stocks soaring in 2019. Bottom line: Stocks are set to finish 2020 higher.
$1,000,000,000,000. That was what the U.S. spent in holiday retail shopping in 2019. That massive record highlights the strength of the U.S. consumer who makes up 70% of the U.S. economy.
What can we gather from these trends? That absent a Black Swan event or unforeseen negative surprise, 2020 is shaping up to be a great year for the U.S. economy, with the labor market strong, wages rising, inflation muted, and interest rates low.
Moving on to the housing market, it looks like 2020 should be an interesting year for residential real estate. Because predicting housing market trends can be challenging, we examined combined projections from the most trusted entities in the industry to bring you as accurate a forecast as possible. We review mortgage rates, home sales, and home prices–and the predictions for 2020 may surprise you.
Projections from the experts at the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), Fannie Mae, and Freddie Mac all forecast mortgage rates remaining stable throughout 2020:Since rates have remained under 5% for the last decade, we may not fully realize the opportunity we have right now.
Here are the average mortgage interest rates over the last several decades:
Three of the four expert groups noted above also predict an increase in home sales in 2020, and the fourth sees the transaction number remaining stable:With mortgage rates remaining near all-time lows, demand should not be a challenge. The lack of available inventory, however, may moderate the increase in sales.
Below are the projections from six different expert entities that look closely at home values: CoreLogic, Fannie Mae, Ivy Zelman’s “Z Report”, the National Association of Realtors(NAR), Freddie Mac, and the Mortgage Bankers Association (MBA).Each group has home values continuing to improve through 2020, with four of them seeing price appreciation increasing at a greater pace than it did in 2019.
Is a Recession Possible?
In early 2019, a large percentage of economists began predicting that a recession may occur in 2020. The economy, however, remained strong in the fourth quarter, and that has caused many to rethink the possibility. Based on the 2020 economic trends we reviewed earlier, a recession is looking less and less likely.
Mortgage rates are projected to remain under 4%, which will result in sales increasing in 2020. With growing demand and a limited supply of inventory, prices will continue to appreciate, while the threat of an impending recession seems to be softening. It looks like 2020 will be a solid year for residential real estate!
If this newfound knowledge has you thinking of buying or selling a home or investment property this year, please give Lise a call at 240-401-5577 for coffee and expert real estate advice!