Will Housing Inventory Tighten Further?

Photo by: Fox Fire Real Estate LLC
December 4, 2019

Housing inventories are likely to tighten more in the upcoming year, making it even more challenging for buyers to find a home. That will come as lower mortgage rates are making it enticing to make a move, realtor.com® reports in its 2020 housing forecast, released Wednesday.

The total number of homes available for sale could hit a record low in 2020, realtor.com® warns, causing economists to predict that the housing market will slow in 2020 as inventories remain very low and economic uncertainty prompts more consumers to hit the pause button. They’re forecasting that housing inventories could particularly reach historic lows in the entry-level segment. First-time home buyers will continue to struggle with affordability, they say.

Existing home sales could fall 1.8% to 5.23 million in 2020.

Realtor.com® economists predict that mortgage rates will remain enticing, averaging 3.85% in 2020. That will help housing affordability, but the lack of homes is proving problematic, they say.

“Housing remains a solid foundation for the U.S. economy going into 2020,” says George Ratiu, senior economist at realtor.com®. “Although economic output is expected to soften—influenced by clouds of uncertainty in the global outlook, business investment, and trade—real estate fundamentals remain entangled in a lattice of continuing demand, tight supply, and disciplined financial underwriting. Accordingly, 2020 will prove to be the most challenging year for buyers, not because of what they can afford, but rather what they can find.”

The increasing inventory of new homes is one positive sign for housing, economists note. However, the construction of new homes in 2019 was largely centered to the upper price brackets of the market and is unlikely to ease conditions for first-time home buyers, they say.

Meanwhile, home sellers shouldn’t necessarily expect a quick sale in 2020 from the lower competition. Homes in the upper price brackets will likely sit on the market longer and may even require greater incentives to close deals, economists note. Entry-level home sellers, on the other hand, can expect steady competition for heir homes, they say.

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