Where Is Housing Headed in 2020 and Beyond?
To appreciate the changes that the real estate industry is facing, take a quick look back at the last decade. Since 2010, the market shifted from an abundance of foreclosures, bank-owned and distressed properties to a paucity of inventory with bidding wars and double-digit appreciation. The internet became the center of real estate transactions and technology evolved as Zillow, Trulia and Realtor.com focused on providing more information directly to the consumer.
In 2010, Airbnb was two years into an experiment that started with three guys renting an air mattress to broke college kids—today, it’s valued at around $31million. A lot can happen in ten years.
Real estate is cyclical. While 2010-2019 was the first full decade in U.S. history to not experience a recession, you can take to the bank that today’s sellers’ market will shift to a buyers’ market at some point.
Most economists agree that low mortgage rates won’t be going anywhere soon with a 30-year fixed rate loan stabilizing at just under 4%. That keeps affordability comparatively high, but an imbalance between supply & demand will continue to stifle buyers’ ability to take advantage of their increased buying power.
There is huge pent-up demand from Millennials and Gen-Zers who want to move from renting to homeownership, but builders are finding it difficult to build smaller starter homes due to the high cost of land, labor and red tape. So there will be pockets of healthy sellers’ markets, where housing inventory meets the demand from buyers, and there will likewise be sluggish buyers’ markets, where homes don’t fit the profile of what most buyers want.
Buyers’ and sellers’ markets can (and do) exist in the same geographic area. In our foothills, for example, homes over $2million were mired down in a buyers’ market for the entire last decade, while homes up to $800,000 enjoyed robust selling activity and impressive price appreciation.
Migration patterns will affect housing as well. People have been moving from prohibitively expensive coastal areas to more affordable inland areas, especially as career opportunities open in vibrant cities like Denver. Young people starting families will opt for homeownership over renting and seem ready to abandon their exciting inner-city lifestyles for quieter neighborhoods not too far from where they work.
Our foothills area stands ready to prosper in the next decade. We lack enough housing inventory for first-time buyers, but many metropolitan areas suffer the same. Even though the commute to Denver is longer than some families may prefer, it takes nearly as long to get from many outlying Denver suburbs—in stressful rush-hour traffic both ways—as it takes to get anywhere from the foothills. Our clients report that the quality of life the foothills offer—the relative quiet, seclusion, views, access to outdoors activities and relaxed lifestyle—drew them to our area. An interesting phenomenon among foothills residents is that no one was transferred here by their employer; they all live here by choice.
So, as 2020 leads us into the new decade, foothills residents can look forward to continued, albeit more subdued, appreciation in the value of their homes. We will, of course, be affected by national & regional economics. It will be important for us to support organizations, governmental agencies and politicians who advocate for the things that make our community an appealing place to live. Good schools, abundant open space, safe roads and a flourishing local economy will ensure our area’s viability for a long time to come.