What you need to know about buying or selling a home in 2020
Buying or selling your home is one of the biggest financial decisions you can make. For many aspiring home buyers and potential home sellers, the coronavirus (COVID-19) outbreak added even more complexity to their decision-making. While no one can accurately predict whether 2020 will be the best year to buy or sell, especially with the lurking specter of COVID-19, we can look at some key indicators to help inform your decision.
If you are buying, selling or sitting on the fence, here are some real estate trends you should know.
Is it a good idea to buy a home in 2020?
In 2019, median home prices in the United States hit a new record high at $316,000. According to the National Association of Realtors (NAR), many economists are predicting that real estate prices will continue to rise by 3.6% in 2020. While that is less than last year, it still puts housing prices out of reach for many Americans.
But these projections didn’t account for the COVID-19 outbreak. The March 2020 stock market crash may have wiped out prospective home buyers’ savings. Social distancing requirements have made in-person viewings and inspections nearly impossible to do. And from March through April of 2020, consumer confidence in general has cratered.
In addition to high prices and COVID-19, housing inventories are still critically low, making for a sellers market. Historically, builders would have needed to build 1.1–1.2 million new homes each year to keep up with demand. Unfortunately, since 2008, the United States has been well below that.
Prior to COVID-19, the National Association of Home Builders (NAHB) forecasted an uptick in new construction for 2020, but not enough to make up for the housing shortage. But COVID-19 may render those forecasts moot. It’s still unclear what effect COVID-19 will have on home buyers.
And if you’re looking for a starter home, the story is even worse. The supply of available starter homes is now close to a historic low. This is likely due to inventory shortages and the fact that older homeowners are downsizing.
One bright side is that mortgage interest rates are near historic lows. But COVID-19 has brought a ton of volatility to interest rates.
Reasons to buy a home in 2020
Although COVID-19 throws a wrench in just about every projection, there are some good reasons to buy a home in 2020.
- Historically low (but volatile) interest rates
- Despite COVID-19, housing prices may continue to rise by the end of 2020. So, buying now could be a cost-effective option.
Reasons not to buy a home in 2020
Though every situation is unique, and we all have yet to determine the true fallout that COVID-19 brings, here are some general reasons why you may not want to buy in 2020.
- Historically high prices
- Limited supply means you may have to settle
- COVID-19 may make inspections impossible
Is it a good idea to sell a home in 2020?
Prior to the COVID-19-fueled stock market crash in March, the United States was experiencing the longest economic expansion since World War II. With that, home prices continued to break records as low supply, low interest rates and an eager and large millennial generation emerged as the largest buying group.
It’s still unclear whether COVID-19 will affect housing prices. But with housing inventories still at historic lows and the emergence of virtual touring, home prices may stay at all-time highs.
The constant increase in home prices throughout 2018 (5% increase) and 2019 (3.3% increase) priced many aspiring home buyers out of the market. Prior to COVID-19, many economists expected modest price increases in 2020. This could be great for sellers, as long as increasing prices don’t push too many people out of the buying market.
Reasons to sell a home in 2020
Again, COVID-19 makes predictions extremely challenging. But generally, there are some good reasons to sell your home in 2020, even in these uncertain times.
- Record-high median home prices
- Low (but volatile) interest rates
- A huge and emerging market of millennial home buyers ready to buy
- Tight inventories give sellers leverage
Reasons not to sell a home in 2020
Though every situation is unique, and we all have yet to determine the true fallout that COVID-19 brings, here are some general reasons why you may not want to sell in 2020.
- Tight inventories may mean more room for growth, if sellers have time to spare
- Low consumer confidence caused by COVID-19 may reduce or even eliminate offers
A good real estate agent can help you decide whether to buy or sell
If you still don’t know what’s best for you, enlisting a real estate agent can help you decide whether 2020 is the best time for you to buy or sell. A good agent will focus on providing you with the data you need to make an informed decision. They can also guide you through the uncertainties of buying or selling during COVID-19.
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