WASHINGTON – A group of top economists generally agreed in their economic forecasts about the 2020 real estate market on Wednesday at the National Association of Realtors®’ (NAR) first-ever Real Estate Forecast Summit.
The economists who gathered at NAR’s Washington, D.C. headquarters, which included Florida Realtors Chief Economist Dr. Brad O’Connor, expect the U.S. economy to continue expanding next year. They project that real estate prices will continue to rise, though at a slower rate of increase than in recent years, and that a recession remains unlikely.
Economists’ 2020 predictions:
- 29% probability of a recession in 2020
- Gross Domestic Product growth of 2.0% in 2020 and 1.9% in 2021
- Annual unemployment rate of 3.7% next year with a small rise to 3.9% in 2021
What will happen with interest rates? When asked if the Federal Open Market Committee will change the federal funds rate in 2020, 69% of the economists said they expect no change, while 31% expect the committee to lower the rate next year.
“We had a burst of single-family home sales this year – something we didn’t see coming,” O’Connor said at the Summit. “My forecast (for 2019) was about 1-2% sales growth, and it really exceeded that.”
O’Connor reported a 4.3% growth in single-family home growth in 2019, with a dip of about 2% for condos and townhouses. “Overall, we had about 2.4% growth” when you include both condos and single-family homes, he reported.
The 2019 average annual 30-year fixed mortgage rates of 3.8% and 4.0% are expected for 2020 and 2021, respectively. Annual median U.S. home prices are forecasted to increase by 3.6% in 2020 and by 3.5% in 2021.
“Real estate is on firm ground with little chance of price declines,” said NAR’s Chief Economist Lawrence Yun. “However, in order for the market to be healthier, more supply is needed to assure home prices as well as rents do not consistently outgrow income gains.”
Apartment rents are expected to rise 3.8% and 3.6%, respectively, in 2020 and 2021. According to the group of economists, annual commercial real estate prices will climb 3.6% in 2020 and 3.4% in 2021.
“Residential and commercial real estate investment remains attractive as we approach the start of a new decade,” said NAR President Vince Malta. “Increased home building can serve as a stimulator for the overall economy, and we strongly encourage more homes to be built as buyer demand remains strong.”
© 2019 Florida Realtors®