If in the beginning of 2019, and after years of steady growth and low interest rates, many real estate and financial gurus expected a correction, and new opportunities to arise fuelled by technology, demographic changes, and the continued winding-down of traditional retail. But what will happen in 2020?
High demand and lower mortgage rates
This will be a year where the high demand and lower mortgage rates will likely continue. However property prices will increase because there are a few listings coming into the market when compared to the demand. As such, some may focus on investing on expensive and higher-profit houses than low inventories of entry-level homes.
The economic diversity and a high quality of life will especially impact this year’s top ten markets for real estate investors and developers.
Affordability will fall
The inventory of homes for sale has been falling steadily for several years and that led to price increase, leading to an affordability issue. As demand increases, due to the growing number of millennials entering the market, the supply of homes for sale could hit its lowest in history. The situation will only be exacerbated by the baby boom generation. According to Realtors 2020 forecast, Millennials will dominate the housing market, accounting for 50% of all mortgages by spring, according to the forecast.
2020 Realtors Forecast
Even though there's a strong US economy that has driven the unemployment rate to record low levels, and even though sellers are motivated, they are likely to get fewer offers in total due to more buyers being priced out of the market as we can see on the graphic below.
One other proof of that is the Case Shiller Home Price Index in the US. This index reached an all-time high of 218.43 Index Points in October of 2019, making it difficult for first-time home-buyers to afford a home.
However, there's "mean-inversion," which can raise the probability of a market correction after years of a big run.
Technology continues to reshape the real estate sector
Technology will continue reshaping the real estate sector, and it will take a greater role in the financial ecosystem, moving into the space left by banks.
If in 2019, billions of dollars were already spend in new business models as us iBuyer platforms and in some Proptech Unicorns like WeWork and Katerra, in 2020 we might expect venture capitalists to be more cautious about their investments in real estate. Proptech money will probably follow big data start-ups that use artificial intelligence to automate various components of the real estate experience, from AI leasing assistants to mobile buying platforms.
Note that there will be also space for companies that develop virtual and self-guided tours.
Hot markets in 2020
During 2020, urban areas will become more populated and priority will be given to use the space more carefully. There will be smaller apartments and developers will become more innovative about how they design and build real estate. They will be looking on how to use space more efficiently, but what will be the hot cities in 2020 ?
Austin is in the first position when it comes to the cities to keep an eye on during 2020. Rising from sixth place to first in overall real estate prospects and from fourth to first place in local expectation of investor demand this is a city full of talent. It is considered to have a popular lifestyle and ambitious commitment to business and real estate expansion.
On the second position we find Raleigh-Durham. This city has been seeing impressive investment in its suburban office and multifamily sectors. Moreover, this metro market topped the rankings for homebuilding prospects. The region’s concentration of educational institutions—Duke University, the University of North Carolina, North Carolina State University, and several smaller colleges—coupled with the Research Triangle Park, has branded the area as a technology mecca, and it now has more than 89,000 tech jobs.
To finish the Top 3, we find Nashville, the 18-hour city. This is a city has a strong potential for continued investment and development.
On the Botton of the top 5 cities, we find Charlotte, that is attracting technology and manufacturing firms, and the well known Boston.
Think globally
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