2020 housing forecast: First-time buyers an opportunity despite slower economic growth
The demand for housing should remain steady largely because of a hot job market and first-time home buyers in the Greater Seattle Area*.
That is the biggest takeaway from the 2020 economic forecast presented by Windermere Chief Economist Matthew Gardner at the sold-out 4th Annual YPN The Edge Breakfast.
The U.S. is currently in a “Goldilocks Zone” – “not too hot and not too cool” – with new jobs added for a consecutive 108 months, an unemployment rate at under 4%, and rising wages.**
First-time home buyers are expected to boost the 2020 housing market as a higher percentage of millenials are buying homes today.
Millennials, currently the biggest generation and cohort in the workforce, make a big footprint in the housing market. In the Greater Seattle Area, 46% of home sales were to millenials. Rather than paying rent, they are investing their money to pay “larger down-payments” and buy homes as they start new families. According to Gardner, more than one million of millenials are becoming mothers in our nation each year.
2020 Local Economic Forecast by Matthew Gardner (Greater Seattle Area)
There is a projected economic growth of 2.2% in the Greater Seattle Area.
Job growth is going to be significant and will raise the total employment rate by about 2.6%. There are nearly 300,000 jobs in the technology industry within our area.
The Greater Seattle Area is still very affordable compared to other major metropolitan areas. Major companies – such as Google, Facebook, Expedia, and Amazon – continues to draw individuals from other states, particularly the bay area. While more people are moving in from out-of-state for more affordable homes and job opportunities, many locals are being priced out of the denser areas of Seattle and migrating South of King County for cheaper homes despite longer commutes.
2020 National Housing Forecast by Matthew Gardner
A national economic recession may be in the horizon. However, Gardner believes that this slowdown will not be as significant as it may seem.
Although the unemployment rate is projected to rise up to 4.5% (a nearly 1% increase) by the end of 2020, there is a projected amount of roughly two million new jobs in the 2020 U.S. job market and we can expect to see real wage growth begin to improve.
Gardner assures that recessions do not always cause home prices to drop. The graph below shows that there were no significant collapsing home sales in past recessions.
Sales are not going to spike up significantly because “we are living in our homes longer.” Gardner raised the point that people are living longer, and baby boomers are staying in the workforce, and thus, staying put in their “local environments”. The average time that people are living in a house is now eight years versus just four years not long ago.
Limited new construction will also apply “upward pressure” on existing home prices.
“Existing home sales are unlikely to rise significantly, but it’s still a seller’s market,” said Gardner. “First-time buyers will continue buying more homes than anyone else.”
*The Greater Seattle Area includes the King, Pierce, and Snohomish counties
**Stats provided by Matthew Gardner, Chief Economist at Windermere Real Estate
Featured image courtesy of LightViva Media & Media