With whispers of trade conflicts and housing bubbles permeating the industry, it can be difficult to gauge the health of the real estate market and what’s in store for the future. With the help of several notable industry economists and researchers, however, the picture becomes a little clearer.
This past week, Lawrence Yun, chief economist at the National Association of REALTORS® (NAR), and several members of his research staff hosted the Residential Economic Issues & Trends Forum during the REALTORS® Conference & Expo in San Francisco.
“This time one year ago, things were very soft,” Yun said. “Consumers were backing out, saying the 5 percent interest rates were too high because they had been looking at 4 percent for four consecutive years.”
Now, things have changed. But where is the market going?
Interest rates remain a focal point. They’ve been trending low, which helps with affordability and job creation. But there’s a difference between Fed rates and mortgage interest rates, and consumers and industry professionals may not be aware when they’re watching those Fed announcements.
“The rates are more tied to communication, not policy,” said Yun. “In prior years, mortgage rates dropped just based on the Fed’s consideration of policy changes, not actual changes.”
The prediction is that Fed rates will remain low, with mortgage rates possibly increasing as inflation kicks in. But in terms of a recession, Yun is confident that one will not happen in the near future if there is no major trade war.
“We will not have a recession and will see a baseline growth rate of 1.5 percent for 2020,” said Yun.
In terms of a housing forecast, Yun predicts moderate growth, but emphasized that building more homes is critical to helping the economy.
Dr. Jessica Lautz, vice president of Demographics and Behavioral Insights at NAR, touched on the results from the newly released Profile of Home Buyers and Sellers.
One of the biggest shifts she’s seeing is a change in the household composition. There are fewer homebuyers who are having children, and that changes buying motivation.
“As birth rates dropped nationwide, fewer buyers have children under the age of 18 in their homes,” said Lautz. “Just a few years ago, buyers were concerned about living near the best schools, but now we’re seeing a jump in the desire to accommodate pets with outdoor spaces and proximity to dog parks and vets.”
In addition, the home-buying age is slowly rising, currently up to 33 from last year’s 32. While it doesn’t seem like a significant jump, Lautz said it is an indicator that consumers have to save for longer periods of time before entering the market, with student loan debt still the major hurdle.
Other trends such as multigenerational living, and friends buying homes together, are becoming more popular.
“Multigenerational living is absolutely a force in the market today,” said Lautz. “More than one in 10 buyers purchased one last year. Traditionally, people have done this to take care of aging parents or aging children that won’t leave, but now they’re doing it for the cost savings.”
Panelists Brandi Snowden, NAR’s director of Member and Consumer Survey Research, and Gay Cororaton, NAR’s director of Housing and Commercial Research, spoke on other trends, such as in the remodeling and foreign buying sectors.
“A kitchen remodel is a great way to increase the functionality and livability of a home,” said Snowden.
Cororaton commented on the sharp decline of foreign buyer purchases since 2017 “amid weakening global economic conditions and rising U.S. home prices.”
Lastly, Julianne Heller, a data scientist with NAR, focused on the importance of predictive analytics, stating that looking at “a member’s choice in music or whether they like coffee” can help in establishing buying trends.
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Liz Dominguez is RISMedia’s associate content editor. RISMedia is the residential real estate industry’s definitive source for news and information. Email Liz your real estate news ideas at email@example.com.