Top real estate markets heading into 2020

Top real estate markets heading into 2020
by Brad Cartier, posted in Newsletter

Dana Anderson of Redfin released this week the most competitive neighborhoods in 2019, and unsurprisingly over half were from the Bay area. “White Oaks in the Bay Area is the most competitive neighborhood of the year for homebuyers, followed by Alger Heights in Grand Rapids, MI and East Arlington in Boston.” Overall, 2019 saw a dramatic decline in competition, with just 12% percent of Redfin offers facing a bidding war throughout 2019, down from 48% in 2018, and 53% in 2017.

Matt Frankel of Millionacres reports on the markets that are expected to have the largest price increases and sales growth in 2020 as ranked by Realtor.com.

Top real estate markets in 2020 for sales and price growth

Source: Millionacres

Beckie Strum of Barron’s reports on the guarded optimism of luxury real estate watchers heading into 2020. “Rising concern over a global economic slowdown, a U.S.-China trade war and uncertainty that crescendoed into full-blown recession fears last summer have all abated to some extent. That’s encouraging news for the world’s luxury real estate hubs, where housing performance is closely tied to global economic growth.”

Prashant Gopal of Bloomberg picks up on the luxury real estate discussion, noting that Miami and L.A. are looking more optimistic heading into 2020, whereas New York City will continue to be a buyers market.

Realtor.com made some interesting 2020 predictions in their recent 2020 Housing Market Predictions report:

  1. Home price growth will flatten, with a forecasted increase of 0.8%.
  2. Inventory will remain constrained, especially at the entry-level price segment.
  3. Mortgage rates are likely to bump up to 3.88% by the end of the year.
  4. Tight inventory and rising mortgage rates will lead to dropping sales.
  5. Buyers will continue to move to affordability, benefiting mid-sized markets.

Affordability

Rachel Layne of CBS News commented on Attom Data Solutions data this week that shows that “average wage earners can’t afford to buy a home in 344 of 486 counties, or 71% of the U.S.,” according to analysis from Attom. That’s a slight improvement, from 73% in 2019 Q3 and 75% in 2018.

Kathleen Howley of Housing Wire reports on how the U.S.-Mexico-Canada Agreement passed by the House of Representatives on December 19—with surprising bipartisan support—will help ease the housing shortage. By stabilizing the prices of materials used in construction, the new trade pact will provide much more certainty in cross-border trade, particularly given that the U.S. is Canada’s biggest export market for softwood lumber, primarily used for home construction.

Kelsi Maree Borland of Globe St reported this week that due to affordability issues, California’s Inland Empire—the area adjacent to L.A. and inland—is becoming a relocation hotspot. “The combination of low-cost housing and a job market has finally made the Inland Empire an attractive SoCal market…As a result, the Inland Empire is seeing significant population growth, and it is expected to evolve rapidly in the coming years.”

For an interesting case study on how France is solving its housing affordability crisis, see this San Francisco Chronicle piece by Yonah Freemark.

Crash talk update

We couldn’t end 2019 without an update on all the crash-talkers out there, starting with Tom Olson of Think Realty. Here’s what Olson had to say about his logic: “I recently researched to find out how many economists in the real estate sector are predicting a market crash in the near future. The total? Zero…I have experienced multiple economic downturns in my career as a real estate investor, and I can tell you from experience: When no one thinks there is a crash coming, that is when the crash will happen. I don’t know exactly how long we have, but I do know the tipping point is getting closer.”

Tyler Clifford of CNBC reports on how homebuilders are attempting to avoid another 2008 by reducing speculation and lowering risk in an effort to prevent “the lessons — if you will, the hard lessons — learned in 2008-2009 from happening again. All of that is frustrating from a consumer perspective, but it’s actually very healthy from an investment and economic perspective for the U.S. as a whole.”

Warning signs of trouble ahead are coming in however, with Kathleen Howley of Housing Wire reporting this week that the number of U.S. homeowners who are pulling equity out of their homes is rising—at a time when markets and prices are at all-time highs. “That, of course, will remind some people of the years before the housing crash, when some Americans turned their homes into ATMs…But, the volume in recent years isn’t even close.” In 2006, owners tapped $348 billion of home equity according to Freddie Mac data, whereas in Q1-3 in 2019, that volume was $66 billion.