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Luxury Homes and McMansions: How is the Real Estate Market Shifting in 2020?
As you may know, the last few years have seen some significant shifts in home purchasing trends. So, what will 2020 bring? Quite a lot hinges on the effects of the economy, new credit scores, and the political temperature…all of which may lead to some market uncertainty. But with unemployment down, home buyers entering the market, and mortgage rates extraordinarily low, it’s likely to still be a busy year.
Home Prices Will Rise, And New Home Sales Will Increase
Home prices are rising because there isn’t enough stock. What does this mean? In many areas, existing home sales are going down due to scarcity, and new home sales are on the rise because of it. For a period, new home developments were stalled, and that led to fewer homes being available than buyers—especially across the more desirable areas of the country. As a whole, home prices are going to see a rise, and new home sales are going to be trending upwards.
In terms of communities, there are a few that will see some of the highest levels of home appreciation: Dallas (TX), Ogden (UT), Las Vegas (NV), Colorado Springs (CO), and Tampa (FL). Real estate is hyper-local, so broader national trends may not impact every state.
Since mortgage rates are remaining lower, borrowers are still going to be eager to make purchases. The housing market is going to be extremely competitive, however, and people may be looking for lower-priced properties to purchase and to “get into” the market.
Mid-Level And Entry-Level Homes Are Going To Grow In Demand
Boomers are reaching retirement age, but wile many of them would usually sell their home to down-size, many of them are finding that they aren’t able to. Their luxury homes and McMansions aren’t likely to sell in the current temperature, as most people are looking for smaller homes, townhomes, and condominiums.
Many home buyers are no longer interested in purchasing the largest possible home. Additionally, these homes are at prices that are far greater than what the average home buyer can afford today. While home prices are still rising, wages are not. People are in better positions to purchase properties now due to the economy, but they will still mostly be looking for relatively modest dwellings.
This may throw the real estate market slightly askew. Luxury properties may slow, and when they do enter the market, they may need to be priced down in order to move.
Homeowners Are Holding Onto Their Properties
There’s another reason why existing homes aren’t entering into the market: homeowners aren’t moving. Many baby boomers are staying in their properties since they cannot sell them, and younger homeowners are building equity in their starter homes rather than purchasing larger homes. Though properties are appreciating in value, they generally aren’t appreciating enough to make selling a property an attractive premise. And because people don’t need to move to find jobs, and because they already have low-interest rates, there are few environmental reasons why they would make a sale.
In short: 2020 is going to see a continuation of the trend. Larger homes, such as McMansions, are not going to be as popular whereas new developments will based on the lack of existing home inventory. And home prices are going to go up, but probably not dramatically. While the economy is leading to additional buyers, these buyers have a tendency to be fairly frugal. “Starter homes,” and mid-level properties, especially new properties, are going to see more growth than the higher end of the market.
No Matter the Trend, Velocity Title’s Got You Covered
Whether it is a buyers or seller’s market, or the rates are changing, the need for an efficient and thorough closing process is a must. At Velocity, we put our clients’ unique needs first, and utilize the latest processes and technology to get you to the closing table fast! See how Velocity has helped others, click here or contact us today.