HANNA KIELAR | NOVEMBER 20, 2019
In 2019, we saw dramatic increases in home prices and an interest rate standstill. As the turn of the new decade arrives, homeowners will still enjoy rising property values. However, more and more of the real estate trends you’ll see will come from millennial buyers and their preferences.
Let’s take a closer look at some of the real estate trends you’ll see in 2020.
1) More Millennial Home Buyers
Do you still think of millennials as fresh-faced college graduates? The reality is that a millennial will probably buy your home. According to the 2019 National Association of Realtors Home Buyer and Seller Generational Trends study, the average older millennial’s (29 – 38 years old) household income is now $101,200. Younger millennials earn an average of $71,200. More and more millennials now have the income and job stability needed to invest in their first home. This study shows that millennials will continue to dominate the real estate landscape, beating out baby boomers and Gen Xers.
What does this mean for home sellers? If you want to list your home in 2020, pay attention to these millennial-friendly features.
? Convenience. Millennials value easy access to city centers and urban hubs. According to data from NAR’s Generational Trends study, commuting cost was the most important factor that older millennials considered when shopping for a home. If your home is within walking distance of public transportation, be sure to mention this in your listing.
? Online access. As a generation of digital natives, millennials begin their home shopping process online. If you want to catch the attention of millennial homebuyers, an online listing on a real estate database like Rocket HomesSMor ForSaleByOwner.com is essential. Boost your chances of a sale by taking plenty of clear photos and creating a comprehensive online listing.
? Easy maintenance. Millennials don’t want to spend thousands of dollars fixing up a property. If your home has low-maintenance features (like smart appliances or energy-efficient windows) you'll attract more millennial buyers. Be sure to highlight these features in your listing.
? A preference for quality over square footage. Though millennial homebuyers’ income is now higher than in previous years, they’re still searching for a first home. Square footage is less important to a millennial buyer than the potential of the space. If you own a smaller home, appeal to millennial buyers by painting the walls a neutral color and allowing plenty of natural light in. This will help younger buyers envision the potential that your space has for personalization.
2) Home Sales Increase In The South
Tech hubs like San Francisco and New York City have a long and storied history of high home prices. However, 2020 will bring in a new area of the United States into the investing spotlight: the south, according to the financial and business consulting firm, PwC. More and more tech companies are moving their operations to southern urban hubs like Texas, North Carolina and Tennessee. This movement could result in a wave of investor interest, as the millennials dominating the tech industry move for work. They predict that Austin will have the highest investor interest in 2020. Real estate markets in Raleigh-Durham, Nashville and Charlotte are also expected to explode in demand in 2020.
What does this mean for you? If you’re a homeowner who lives near a southern urban hub, you could gain more equity in your home as property values increase from inflation. If you plan on staying in your house, consider earning extra cash by renting out your home to millennial tech employees.
If you’re looking to buy a home in one of these growing areas, you’ll need to be more aggressive when you shop. Increased demand means that sellers will have more offers to choose from, leaving you with less room to negotiate. Making an offer for more money and writing a letter of interest to your seller with your offer can increase your chances of approval.
3) Higher Temperatures Affecting Housing
The National Oceanic and Atmospheric Administration determined that July 2019 was earth’s hottest month ever recorded – and temperatures are continuing to swell. If these temperatures continue, it may begin to affect the real estate market. High temperatures in urban areas increase cooling load by about 13%. This means less comfort indoors and higher cooling bills for owners. Extreme heat can also make wildfires and drought more likely, mess with electrical power grids and lead to more air pollution. If you live in an urban center or an area that’s now experiencing very high temperatures, your property value may begin to decrease over time.
Homeowners can mitigate these changes by outfitting their homes with temperature-controlling measures. Renter and buyer preferences are likely to change as temperatures continue to increase. If your home has a central cooling system or energy-efficient windows, you’ll have more buyers interested in your property. On the other hand, if you live in an area that’s prone to wildfires or drought, you may see a decrease in value as things heat up.
4) Slightly Lower Interest Rates
After last year’s mortgage interest rate increase, 2020 is looking a little better for buyers. Experts predict that interest rates will remain largely the same from 2019 to 2020. Current market conditions may also cause a slight drop in interest rates within the next 2 years – though this isn’t a guarantee.
So, what does this mean if you’re selling your home? As a seller, declining market rates can be a powerful force when it comes to moving out of your home. When market rates are lower, buyers can afford to take on a larger principal balance. You may want to consider pricing your home a bit above market value to leave yourself room to negotiate with buyers. This is especially true if you live in an area where homes don’t stay on the market long. Consult with a local listing agent for assistance pricing your home.
What if you’re the buyer? If market rates drop, you might want to consider locking in your mortgage interest rate with a fixed loan. Fixed-rate mortgages keep the same interest rate throughout the duration of the loan. No matter if rates rise or fall in the future, you’ll still pay the same rate. Fixed-rate loans can save you thousands if you lock-in during a time when mortgage rates are low.
5) The Rise of “Hipsturbia”
As millennials grow up, their taste in housing and real estate is changing. As they have children and begin earning higher salaries, more and more millennials are making their way to the suburbs. However, unlike previous generations, millennials don’t want to slow down as they grow up. Suburbs surrounding “24-hour cities” like New York City and Chicago are exploding in popularity among this group of buyers. And residents aren’t the only things moving into the suburbs. More and more millennials are also bringing the big-city culture with them. This exodus from the inner city to the suburbs has led to an increase in what experts are calling “hipsturbia.” A combination of the words “hipster” and “suburbia,” hipsturbia is essentially a “cool” suburb. It has easy access to public transportation, great schools and affordable housing.
The rise of hipsturbia seems to show that millennials will mirror the baby boomer generation’s flight to the suburbs. This can lead to more equity and higher property values in you own a home in an up-and-coming hipsturbian center. But don’t get excited just yet – experts say that not every suburb can expect flourishment in 2020. Suburbs with easy walkability, plenty of dining and retail options and quick access to the inner city will see the most growth. Suburbs “in the middle of nowhere” won’t see the same increase in property values.
6) Active Baby Boomers
According to a report from the Bureau of Labor Statistics, baby boomers are staying in the workforce much longer than previous generations. About 13 million Americans age 65 and older will be in the workforce by 2024. The average baby boomer can expect to live until age 79. With longer lifespans come increased retirement costs, leading more and more boomers to keep their jobs and work into retirement age.
What does this mean for homeowners? As medical technology advances and lifespans increase, you’re more likely to stay in your home for a longer period of time. This means more equity and a more secure investment for long-time homeowners.
Increased boomer activity is also good news for those who live in a smaller home. As older men and women decrease their working hours and say goodbye to their adult children, downsizing will become more common. If you own a smaller home, you’re likely to see an increase in your equity. If your home offers easy access to public transportation, expect a large increase in equity.
The year 2020 will bring along many new real estate trends that will influence home values and how buyers shop for properties. The turn of the new decade will solidify millennial domination of the market, leading homeowners to sell properties with features that appeal to millennials.
Millennials will be particularly interested in homes in up-and-coming southern tech centers. Cities like Austin and Raleigh are likely to see major growth in 2020. Many urban suburbs will also experience a resurgence in 2020, leading experts to coin the term “hipsturbia.” Increasing lifespans and improving medical technology means that real estate will likely continue to be a solid investment.
Weather temperatures will also influence housing markets and property values. Homes in areas prone to drought and wildfires will see their property values fall. On the other hand, homes with temperature control features will likely increase in value. No matter where your home is, expect minimal changes in interest rates. If you’re in the market to buy or sell a home, don’t try to tackle the housing market alone. Contact the Rocket Homes team today for professional assistance listing your house or finding your new home.