Real Estate Blog


    real estate market outlook 2020

    In Greater Lansing and across the nation, the housing market looks positive in 2020. Strong economic growth and low mortgage rates contribute to upward movement, while rising demand and short supply will increase competition. Let’s take a closer look at the real estate market outlook in 2020, both here in Lansing and across the nation. 

    Local and National Real Estate Market Outlook in 2020

    On the Economic Front

    A strong local economy is an essential ingredient for a strong local housing market. Certainly, the state of the national economy is also important—and all indicators on that front are very positive—but it is local employment that creates the confidence that translates into strong home sales. 

    The Lansing area has continued to add jobs since 2011, unemployment remains low, and the economy is very balanced. The manufacturing sector is growing, health care providers are thriving, insurers headquartered here are growing, and the tech sector is expanding. Michigan State University is a continuing engine for growth. The local economic environment is very conducive to housing growth and a positive real estate market outlook in 2020 for Greater Lansing.

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    Mortgage Rates

    Mortgage rates play an important role in the real estate market outlook in 2020. Most industry pundits predict that interest rates will remain near historic lows, currently about 4%. There is no evidence that there will be upward pressure on rates. The Urban Land Institute estimates the 10 -year treasury note, which correlates to fixed mortgage rates, will rise only slightly over the next two years. Barring significant changes in global events related to China, Brexit or other geopolitical trauma, rates should remain relatively stable. 

    The Millennial Effect

    Millennials, the oldest of which turn 29 this coming year, are coming into the prime homebuying period. In 2020, experts predict that over 50% of mortgages taken out will be from this generation. 

    According to the National Association of REALTORS Profile of Home Buyers and Sellers, the median age of all first-time buyers is 32. More household formations and the birth of children in this demographic will drive demand for a variety of housing for many years to come. Millennials are also purchasing higher-priced homes, often skipping the traditional starter home, and not acting like traditional first-time buyers. They are also less willing to buy “fixer uppers” or poorly maintained property.

    What About the Supply of Homes for Sale?

    Not only is buyer demand by millennials increasing, but existing homeowners are staying put longer. According to recent census data, home owners are now spending 13 years in their homes on average up from 8 years in 2010. Inventory of saleable property is expected to remain tight in 2020, though improving over 2019.

    Will It Be a Buyer’s or Seller’s Market?

    Absorption rate, the number of months required to sell all the inventory available in the market, will stabilize, but will remain under 3 months. This means a seller’s market will continue in 2020. There will be some movement toward a normalized market as the year progresses, but it will be a long way from a balanced market, which is normally 6 months. At affordable home prices, it will be a seller’s market. The absorption rate for upper-tier properties is much longer and can get as long as 1-2 years, depending on the location. Consequently, buyers will be in control at the upper end of the market.

    What Happens to Sales Prices?

    Given all the foregoing factors, we believe the average sales price will continue to increase, though not at the +7% rate in 2019. Most pundits feel average sales prices will increase in the 3-5% range.

    Affordability is Good

    Many coastal and tech centric markets are suffering from rapidly escalating sales prices, forcing many potential buyers to give up on home ownership. This has actually caused average selling prices to decline from astronomical highs. The Greater Lansing market remains very affordable. The average household income here would qualify for the purchase of the average priced home.

    What Does All This Mean?

    The real estate outlook for 2020 is competitive for buyers. Buyers in 2020 will need to be totally prepared to buy when they find the perfect property. They will need to be prequalified for a specific mortgage amount and realize their negotiating power is limited. For sellers, houses that are properly priced and present well could continue to get good market activity. Houses at the upper tier will take much longer to sell. 

    All in all, the Greater Lansing housing market will remain healthy, though not without challenges. The only headwind to good real estate sales in 2020 is the supply of saleable inventory. Home prices and demand will remain high as home supply lags behind and the economy continues to expand. However, buyers who are organized and prepared to buy will find that home ownership is well within reach. 

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