Wow, 2020 has been a challenging year. With so much happening across the country, you might be wondering how the current crisis is impacting real estate trends. Well, surprisingly, median home prices are all the way up to $320,000!1 Will the rest of 2020 bring more of the same results? How will the housing market shake out in the current economic climate?
Whether you’re selling, buying or staying put, here are the 2020 real estate trends you need to know!
Real Estate Trend #1: Home Prices Are Still Rising Slowly
Okay, let’s start with home price trends. In April 2020, home prices grew by a teeny-tiny 0.6% compared to last year—down from the nearly 4% growth rate in March!2 This slower growth trend is likely due to the craziness of the coronavirus and market uncertainty.
But within the third week of May, home prices moved their way back up to a 3% growth rate—almost to pre-COVID levels! So there’s a chance that home prices might be regaining some momentum.
National Association of Realtors Chief Economist Lawrence Yun believes home prices will make their way back up to 4% growth overall in 2020.4 So, you’ll likely see home prices continue to creep up, but they probably won’t knock your socks off with rapid growth like we’ve seen in previous years.
National Association of Realtors Chief Economist Lawrence Yun believes home prices will make their way back up to 4% growth overall in 2020.
What Higher Prices Mean for Sellers
A nice profit may be on the horizon! But also keep in mind that a lot of buyers are being priced out of the market at the moment, which could lead to fewer offers for your home. So, what should you do about this? Be aware of your competition.
With less offers to go around, you want your home to really stand out from similar ones in your area. Prepare your home for potential home buyers and work with a real estate agent to help you list your home at the right price.
And be sure to wait for the right offer. Some buyers may try to gut punch you with a low number. If you aren’t in a hurry to move, wait for an offer that gives you the most profit. Remember, the less desperate person always has the upper hand when negotiating!
What Higher Prices Mean for Buyers
If you’re going to buy a home in this expensive market, you absolutely must find out how much house you can really afford. Crunch the numbers yourself with our free mortgage calculatorand figure out a monthly payment your budget can handle.
Commit to staying within that budget amount. Don’t rush into a home purchase that doesn’t make financial sense for you no matter how much pressure you feel watching competitors pluck good homes off the market. You could screw up your finances!
If you can’t put down at least 10–20% on a 15-year fixed-rate conventional loan, then you probably can’t afford a house in this market. A down payment that’s less than 10–20% will strangle your budget with massive monthly mortgage payments. But if you want to get prepared to buy and you’re committed to your budget, here are some options to consider:
Keep saving. If you stay patient and motivated, you can save for a five-figure down payment by this time next year.
Sacrifice some wants. If you can’t afford to buy the house you want, be willing to give up some “nice-to-haves” for your “must-haves.” Find the least expensive home in the best neighborhood you can afford and you can upgrade as your income and savings increase over time.
Expand your search. What if the location where you’re planning to buy is what’s busting your budget? You might be surprised at the gem you can find in a less popular neighborhood. Working with a real estate agent who really knows the area is the best way to find a home that fits your budget and lifestyle.
Buying a home can be stressful, but our Home Buyers Guide will streamline the process! It’ll help you think through all the important parts so you can rest easy when your dream home is officially yours.
Real Estate Trend #2: Mortgage Interest Rates Are Super Low
Mortgage interest rates have been trending down—even before the pandemic. In May, the average interest rate for a conventional 15-year fixed-rate mortgage (the cheapest type of mortgage and the only kind we recommend) dropped to 2.69%—the lowest it’s been in over seven years!5
In May, the average interest rate for a conventional 15-year fixed-rate mortgage (the cheapest type of mortgage and the only kind we recommend) dropped to 2.69%—the lowest it’s been in over seven years!
Economist geeks think interest rates will continue to stay low until the economy is close to normal again. But interest rates probably won’t go so low as to hit rock bottom since lenders still have high demand from current homeowners to refinance their mortgages at lower rates.6
If you want to refinance or get a smart mortgage that helps you pay off your home fast, talk to our friends at Churchill Mortgage.
What Lower Rates Mean for Sellers
If interest rates stay low, buyers will be more motivated to buy your home sooner than later. But if interest rates do start to increase later in the year, just plan for your house to be on the market a little longer. A mortgage is a big commitment, and adding higher interest rates to the mix will make many buyers pause.
An experienced real estate agent can help you set the right expectations on how much money to sell your house for and how long you’ll have to wait for the best offer.
What Lower Rates Mean for Buyers
Even though interest rates are super low, be smart and go for a conventional 15-year fixed-rate mortgage (unless you can buy with cash). Avoid getting locked into paying the extra interest and fees that come with rip-off mortgages like FHA, VA, USDA and adjustable-rate ones. That way, you’ll know exactly what your payment will be over the life of the loan and you’ll pay it off faster!
Real Estate Trend #3: Millennial Home Buyers Are the Majority
That’s right, our final trend is about who is buying homes. And once again, millennials took the lead as the largest group (38%) of home buyers last year.7
What is a millennial exactly? Well, the technical answer is anyone born between 1980 and 1998. The easiest way to spot a millennial home buyer? They can’t wait to post a pic of their new home on Instagram!
What Millennial Buyers Mean for Sellers
Here are three important words: Know your buyer. In a nutshell, millennials are internet savvy and do their research before house shopping. Here are some tips:
Upgrade your online listing. Virtually all millennials (98%) use the internet for their home search—and 78% of them found the home they purchased on a mobile device last year.8 So, make the best possible impression on the internet by investing in high quality listing photos. You might even need to take video footage to give potential buyers a digital tour of your home.
Highlight perks over size. Yes, square footage matters. But millennials are more concerned about their commuting costs and how close their new home is to schools. In fact, most millennial buyers said they were least likely to compromise on school and neighborhood quality when deciding which home to buy.9 So, highlight the benefits of your home’s fabulous location instead of wasting time trying to sell on its size.
Know popular features. Here are some of the top home features millennials want: laundry room (86%), patio (81%), garage storage (80%) and a walk-in pantry (79%).10 If you’re thinking of making some upgrades to your home, choosing one of those might have millennials showering you with offers when you’re ready to sell.
What Millennial Buyers Mean for Buyers
Okay, if you’re looking for a three-bedroom, single-family home in the suburbs, expect to have a lot of competition. You may have to reprioritize what you want in a dream home. Follow these tips:
Know what you want. Decide what you absolutely need in a home. If you’re married and house hunting, you and your spouse need to agree on must-haves. Compare your individual lists and combine them for your real estate agent to use as the foundation of your home search.
Write a letter. Sending a personal story to your seller might be just the thing that makes you stand out from similar offers. Nashville couple Abby and John included a personal letter when they made an offer on their home. “We sent the sellers a personal letter with our offer,” Abby said. “The best thing you can do is to include in the letter things you love about their house. If they have a deck or screened-in porch, tell them how you envision using the space. We did that and the sellers accepted our offer—out of multiple offers—within 24 hours.”
Hire an experienced pro. Last year, 92% of millennial home buyers used real estate agents to purchase their homes.11 Think they’re onto something? You bet! Save yourself the stress of trying to buy on your own. Get the help of a real estate pro so the home-buying process is smooth for everyone involved.
What if I’m Not Buying or Selling a Home This Year?
You may be thinking, All this is great, but I’m not going anywhere anytime soon. We hear you, and here’s what you should know for now:
1. Equity is unlikely to decrease through 2020.
With most housing markets at low risk for a downturn, the 2020 Housing and Mortgage Market Review estimates home prices will continue to rise for the next couple of years.12 Woo-hoo for sellers! If you sell your house before 2023, you’ll likely still make a nice profit. Continue to monitor how much your home is worth to make sure your equity (what your home is worth minus how much you owe on it) is going up.
2. From what we can see, the real estate market isn’t going to crash.
With the uncertainty around our current economic crisis and price growth slowing down, some folks are wondering about the future of the housing market and if it could collapse again. Well, it’s impossible to know for sure, but economists suggest a housing crash is unlikely.
After all, the super low mortgage rates are motivating buyers to enter the market, which increases demand. But there’s still a record-low supply of home listings. This is keeping home buying somewhat competitive and allowing home price growth to stay steady.13
3. Regardless of your neighborhood, buyers are interested.
Since home prices have experienced rapid growth over the past few years, some buyers may be less choosy. In fact, determined ones might be willing to consider neighborhoods that don’t have easy access to highways or aren’t in close proximity to a big city. If you think you live in an unpopular neighborhood or believe your home isn’t what buyers are looking for, think again. Now may be your perfect time to consider selling.