This time of year is when the market is slower and I spend more time paying attention to economic forecasts for the upcoming year. The bottom line is economists are like sheep and they run in the same herd and make pretty consistent predictions with each other. The reason why is simple, they are all looking at the same data and coming to the same conclusion.
Economists typically don’t take risks trying to forecast unknowns such as politics and foreign policy. They’re also not very good at going out past a year or so as the data doesn’t exist to support any long-term conclusions. For buyers, predicting what your home will be worth in five years is not realistic. The only feasible answer is it will be worth more if things stay the same. You don’t have to be an economist to make that kind of prediction. On the flip side, there’s no doubt we will see a recession. Nobody knows when, how deep, nor the cause. The basis is historically, we’ve always had one.
The prevailing economic prediction for 2020 is more of the same. That is a balanced housing market fueled by low interest rates, dominated by inventory shortages, with little price appreciation. It should be a better year for buyers than before if they have the money to buy a house. “Inventory shortages’” is code for affordability challenges. Housing prices have risen substantially since 2012 and payments are high for homebuyers. Income has not kept up with homeownership cost. If it was not for low interest rates and high rental rates we would be dead in the water. Hopefully, we will get a breather in price appreciation giving wages a chance to catch up a little bit.
The wildcard is the social uncertainty surrounding politics and foreign policy. It’s pretty hard to predict war until it’s time to go to war and impact of the upcoming election is an overrated concern. The bottom line is the economy is doing great even with the Chinese tariff/Middle East turmoil/North Korea missile/Ukraine vs Russia situations. The predictor I pay the most attention to are financial markets. Our financial markets are doing great. The Dow is nearing 30,000. If that upward trend starts to turn south, something not good is on the horizon and could shake the almighty purveyor of our bread and butter, consumer confidence.
Take a look at the short video from Realtor.com Senior Economist George Ratiu. It’s the same basic prediction you will find from any economist in this sector. Of course he’s talking about the whole country and local market conditions can be different and prevail. In our local DFW market, we are in better shape than the rest of the country. Home affordability is still much greater in Texas and DFW than the East and West Coasts.
What Buyers Can Expect for Real Estate in 2020
Courtesy of realtor.com. 12/31/2019