Rising demand and a deepening inventory shortage are set to push prices up at the fastest rate in years in 2020, setting up for a positive February 2020 housing market outlook.
“With every new release of data this year, I’m becoming more and more confident that demand will be strong in 2020 – just as strong as, if not stronger than, in 2018 and 2017,” said Daryl Fairweather, Redfin chief economist. “The big question for the housing market this year is supply. Will homeowners sit on the sidelines, content with their refinanced loans, or will they want to get in on the action too and move up, move down, or cash out entirely? New construction is beginning to pick up in some markets though, so even without new listings of existing homes, there will be some relief for homebuyers hoping for more selection. However, due to the high cost of acquiring and developing land in expensive coastal cities, much of that new construction will be built far away from urban centers or in already affordable metros.”
While it’s not unusual to see a jump in homebuying activity early in the year, the jump this year is unusually large, according to Redfin. On Jan. 15, the Mortgage Bankers Association reported that its purchase index hit an 11-year high.
“Unless a lot of new housing inventory hits the market soon, the 10-year peak in homebuying demand, coupled with a 20-year low in the numbers of homes for sale, will lead the housing market straight into the mother of all inventory crunches,” Redfin said. “That could result in a sudden and rapid rise in bidding wars and spiking home prices.”
“I’m regularly seeing homes with well over a dozen offers that sell for hundreds of thousands above list price, even in the middle of our recent snowy week,” said a local agent. “In a typical year, I’d say to wait it out and expect more homes for sale in the next few months … but now I’m warning clients prices may only continue to rise and the inventory may not appear.
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