Is There an Economic Storm on the Horizon?
No one knows…but here are some real estate market predictions for 2020.
There’s a lot of talk about the economy and the dreaded “r” word…recession. I’ve been reading and listening to experts on the economy, housing, and banking to try and get a jump on what’s coming. Here’s what I’ve been able to ascertain:
There is a great amount of uncertainty out there. For example, Morgan Stanley, one of the largest global financial service companies, was quoted saying, “…we will enter into a global recession in three quarters.” So there we have it a recession is coming, right? Well, not so fast!
The very same week, Goldman Sachs, had this to say about our economic future, “The chance of a recession in the near term is relatively low.”
With two of our largest, most successful financial services companies disagreeing on the coming future of America’s economy, I imagine many folks are confused, scared, and preparing for the worst. I’m not trying to argue for or against a recession. I’m simply working to layout what the next year looks like for those considering selling their house or buying a home.
There are many factors affecting the economy heading into 2020 like the coming presidential election, current trade wars between the US and China, and a slight slowdown in global economy. If you’re paying attention to CNBC or the Wall Street Journal, you see these factors cited in the up and down of the stock and bond markets. Overall, our economy is strong: unemployment is incredibly low, wages are steady; if not slightly rising, and consumer confidence is strong. With all of this, the chance of a recession still looms.
Even with all of the confusion over the future of our economy, there are indicators that the housing market is strong and will remain a positive for home ownership and investing in real estate.
Home values and equity are up
The rise in home values has helped to create more equity in homes across the US. Additionally, strong unemployment numbers and rising worker pay help bring more buyers into the market. Lastly, incredibly desirable mortgage interest rates have brought more buyers to the market and helped hold home prices up. These factors coupled with the fact mortgages are no so easily received means the housing market is not a bubble ready to pop, it’s the strong foundation of our economy.
A closer look at home values, shows us that owning a home and/or investment properties is owning a hard asset, like gold. The values are going up and are predicted to continue to rise.
According to Zillow, in the last year home values across the US rose 4.9% and Zillow predicts by August 2020 the values will increase 2.2%. If you look at home owners nationally, the Federal Reserve reported earlier this year that Americans owned 60.4% of their homes. This is the highest amount of equity since 2006.
If we drill down into Northern Virginia, Loudoun County saw home values rise 3.3% over the last year and Zillow believes 2020 will see a rise of at least 1.2%. Ashburn values rose 2.9% in 2019 with a prediction of 1.4% in 2020 and Leesburg values rose 3.0% in 2019 and are predicted to rise 1.2% in 2020.
Fairfax County saw a 1.7% increase last year with predictions of a 1.0% increase in 2020.
Additionally, as of July 2019 40% of homeowners in the US own their home free and clear of a mortgage. The amount of homeowners without a mortgages should continue to rise with homeowners staying put longer and paying off mortgages quicker.
Finally, the US foreclosure rate fell to its lowest level in 20 years. The foreclosure rate is 0.4% down 0.1 point since last year. The fundamentals of the housing market are strong and continue to indicate real estate is a great investment.
Recession or not, real estate is a solid investment in 2020 and beyond.
As you can see, even with predictions of economic doom and gloom the future of real estate is positive. Homes are a hard asset that will continue to rise in value, maybe not at the astronomical rates they have been, but for investors and families looking to hold homes for at least 5–7 years, the investment is wise. While no one has a crystal ball, the signs point to a slowdown in 2020. While the stock market is in a constant state of flux, owning property is a solid asset. Appreciation and the low cost to borrow cash makes buying real estate a solid move in 2020.
