2020 Real Estate Forecast

Provided by Steven Thomas at Reports On Housing

Happy New Year!! What does 2020 hold in store for Orange County Real Estate? We think a stronger year than the last.

  • Active Inventory – the year will begin with around 3,750 homes, the third lowest start in the last decade behind 2013 and 2018. That will translate to a very hot start for housing. The theme for 2020 will be not enough homes on the market. For buyers that equates to not enough choices. Expect the active inventory to peak around July between 6,750 to 7,250 homes.
  • Demand – with an anemic inventory and buyers reenergized by historically low rates, demand will be strong throughout the Spring and Summer Markets. Buyers will be willing to stretch slightly in price compared to the most recent sale; so, expect appreciation around 3 to 4% for the year. Demand will be strongest, and most appreciation will occur, from March through July, and then will downshift during the Autumn and Holiday Markets.
  • Housing Cycle – the housing market will follow a normal housing cycle. The strongest demand coupled with plenty of fresh inventory will occur during the Spring Market. This will be followed by slightly less demand and a continued new supply of homes in the Summer Market. From there, demand will drop further along with fewer homes entering the fray in the Autumn Market. Finally, all the distractions of the Holiday Market will be punctuated with the lowest demand of the year and few homeowners opting to sell.
  • Closed Sales – the number of successful, closed sales will increase 3 to 5% compared to 2019 (2019 was up 2% compared to 2018), around 30,000.
  • Luxury Market – luxury sales will increase from 2019’s record by about 10%. The Spring Market will be the strongest for luxury, and the second half of the year will be especially sluggish. 
  • Interest Rates – look for mortgage rates to hover between 3.5% to 4.5%. Long term rates are driven by economic fundamentals and headline risks. The “trade war,” Brexit, the upcoming presidential election, global growth or slowdown, all drive mortgage rates up or down. If the economy continues to improve, rates could rise into the 4’s. With more negative news, rates could drop further. Currently, mortgage rates are hovering around 3.75%. Do not expect them to change much as 2020 unfolds. 

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