Esquire Real Estate Brokerage’s 2020 Real Estate Predictions
Let’s get this question out of the way – will 2020 be the year that the real estate “bubble” finally bursts? Probably not. But as homes become more and more expensive, and interest rates begin to rebound after last year’s cuts, we expect a more stable market and slower growth than in prior years. In this article, we discuss market activity last year, what other’s are saying about 2020, and Esquire Real Estate Brokerage, Inc.’s 2020 real estate predictions.
Prior Real Estate Predictions And Recap Of 2020
Looking back at predictions about what would happen in the real estate market in 2019, it is safe to say that almost everybody was wrong. Based on the Fed’s December 2018 announcement that it expected to raise the target interest rate twice in 2019, almost all analysts were expecting mortgage rates to rise above the 5% mark, which would presumably have resulted in reduced demand and at least a slow-down in rising home prices. Instead, the Fed cut the target interest rate three times, resulting in continuing record-low interest rates, and a booming real estate market. The below chart is Freddie Mac’s data depicting average mortgage interest rates for loans issued in 2019, and it shows the decline in interest rates for 30-year fixed rate mortgages (blue), 5/1 adjustable rate mortgages (orange), and 15 year fixed rate mortgages (green):
What Others Are Saying About 2020
As with prior years, we first look to what other organizations are saying about 2019 real estate predictions. The following is a sample of 2019 real estate predictions from some well-established publications and real estate organizations:
• The California Association of Realtors predicts increased home sales and a 2.5% increase in median housing prices.
• Curbed Los Angeles predicts continuing increases in home prices, but at a more moderate pace than in recent years.
• Zillow similarly predicts continuing increases, but more stable, home prices.
• Redfin, on the other hand, predicts fewer homes for sale, more buyers, and more bidding wars for desirable properties.
Esquire Real Estate Brokerage, Inc.’s Predictions
Suffice to say that 2019 did not go as expected. The Fed’s sharp turn in cutting interest rates three times, after announcing it expected to raise interest rates at least twice, had a significant impact on the market and affordability for home buyers. 2019 is a perfect example of how predictions are just that – predictions.
That being said, we tend to agree with the majority of sources predicting that this year will see slower, more stable growth in home prices. As the trade wars that have put pressure on local and global economies are resolved, we expect to see economic growth sufficient to induce the Fed to raise interest rates, or at least leave them as-is. This will, in turn, increase the cost of home ownership, reduce demand, and slow the growth in home prices. Indeed, the Fed has announced in December that it expects to leave rates unchanged in 2020. Of course, as we learned from last year, only time will tell.
If you would like to further discuss Esquire Real Estate Brokerage, Inc.’s 2020 real estate predictions and how we can help you in the Los Angeles real estate market, feel free to give us a call at 213-973-9439 or send us an email at firstname.lastname@example.org.