With mortgage rates and supply low, the housing market will be more competitive in 2020 as the slowdown that began in the second half of 2018 comes to an end, predicts Redfin, the technology-powered real estate brokerage.
“Low mortgage rates started to revitalize the market at the end of this summer, but we won’t see their full impact on demand for housing until next year,” said Redfin chief economist Daryl Fairweather. “In 2020, buyers will have fewer homes to choose from than they have in five years. But the return of bidding wars is good news for sellers who may have been holding out this year as the market stabilized. The competition and faster price growth will tempt more homeowners and builders to list homes, which will help improve the balance between supply and demand by the end of the year.”
Throughout 2020, 30-year fixed mortgage rates will remain low, hovering around 3.8%. But with a lack of new homes up for sale and homeowners staying in place longer, there will be fewer homes on the market in 2020 than in the past five years. More demand and less supply mean bidding wars will rebound in the first quarter. Redfin expects about one in four offers to face bidding wars in 2020 compared to only one in 10 in 2019. This increase in competition will push year-over-year price growth up to 6% in the first half of the year, considerably stronger than the 2% growth seen in the first half of 2019. Supply and demand will become more balanced later in the year as more listings of new and existing homes hit the market and price growth will moderate to 3%.
Affordable Southeast cities like Charleston and Charlotte are attracting an increasing number of migrants from expensive cities, which will drive up home price growth in these areas. Charleston saw a 104% annual increase in the number of Redfin users looking to move in, relative to the number of users looking to move out, in the third quarter of 2019, and Charlotte saw a 44% increase. Migrants are attracted to the growing economies of Charleston and Charlotte — Microsoft is spending $23 million to expand its Charlotte campus, and in Charleston, the new Volvo plant is adding thousands of jobs.