U.S. home sales probably will fall next year as Baby Boomers gridlock the housing market by aging in place, according to a forecast from realtor.com.
Sales of existing homes likely will fall 1.8% to 5.23 million while the inventory of available homes reaches historic lows, the forecast said. Home prices will probably rise just 0.8%, the report said.
“2020 will prove to be the most challenging year for buyers, not because of what they can afford but rather what they can find,” said George Ratiu, senior economist at realtor.com.
Mortgage interest costs probably will continue to remain low in 2020, the forecast said. The average rate for a 30-year fixed mortgage probably will be 3.85%, the forecast said. That compares with an average of 3.9% for 2019, according to a Fannie Mae forecast.
While a recession isn’t likely in 2020, the economy is expected to soften as uncertainty about global trade weighs on growth, Ratiu said. That outlook is going to influence Baby Boomers to stay in place, the report said.
“With housing prices expected to stabilize and concern over economic uncertainty, there will be little incentive for Baby Boomers to sell in the coming year,” the report said.
The cohort of Americans born between 1946 and 1964 “will continue to hold onto their homes,” rather than move to retirement communities like many of their parents did, according to the report.
Even though homebuilders likely will be ramping up production, it’s not going to provide enough relief to keep home sales increasing, the forecast said.
“Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015,” the report said. “The construction of new homes in 2019 was largely isolated to upper-tier of housing and that is unlikely to ease conditions for first-time homebuyers.”
As younger buyers seek affordable homes outside of big-city metro areas, housing markets in Arizona, Nevada, Texas, Georgia, Florida and the Carolinas will likely see an uptick in demand, the report said.
“As buyers are priced out of suburban environments near large metropolitan areas, they will begin searching for family-friendly lifestyles in other metros or across state lines,” the report said.
For example, the metro area around McAllen, Texas, likely will see a 4.4% gain in home sales and a 4% price bump, the report said. Tucson, Arizona, probably will see sales increase 3.4% and prices gain 3.3%, the forecast said.