Will the Home-Price Outlook for 2020 Motivate Buyers Into Action?

Highlights from this report:

  • CoreLogic’s home price outlook for 2020 predicts steady gains ahead.
  • The group sees home values nationwide rising by 5.6% through September 2020.
  • That’s more than the actual gain of 3.5% over the past year or so.
  • The threat of rising prices could create a sense of urgency among buyers.

The end of the year is nigh, and many home buyers are already looking ahead to 2020. And you can bet many are asking the same question: What’s the outlook for U.S. home prices in 2020?

According to a recent report from the property data company CoreLogic, home prices nationwide could actually rise more over the coming year than they did over the previous year. But not all forecasters agree with that.

A Bold Home-Price Outlook for 2020

In November 2019, the Irvine, California-based company published their latest outlook for home prices in the U.S. Among other things, they predicted that house values would continue to climb into 2020 — and perhaps even accelerate.

To quote their report:

“National home prices increased 3.5% year over year in September 2019 and are forecast to increase 5.6% from September 2019 to September 2020, according to the latest CoreLogic Home Price Index (HPI®) Report.”

The “HPI” index mentioned above draws data from a number of sources and covers more than 7,000 zip codes across all 50 U.S. states. The company publishes new updates every month, with a five-week lag time.

Their latest home-price outlook, which stretches into the fall of 2020, suggests the rate of appreciation has regained some momentum in recent months. That’s partly why their outlook for the future exceeds the actual price gains recorded over the past year.

But not all sources agree with this relatively bold home-price forecast. In November 2019, the housing research team at Zillow wrote:

“United States home values have gone up 4.8% over the past year and Zillow predicts they will rise 2.8% within the next year.”

The economists from Freddie Mac issued a nearly identical outlook for home prices. In October, the group predicted that “house prices will increase 3.3% and 2.8% in 2019 and 2020, respectively.”

Despite variations in these long-range forecasts, the general consensus appears to be that house prices nationwide will continue to rise through the end of 2019 and into 2020.

For what it’s worth, we tend to lean toward the more modest outlooks issued by Zillow and Freddie Mac. Given the housing trends we’ve seen over the past couple of years, it’s hard to imagine home-price appreciation accelerating by a large degree as CoreLogic predicted.

House Values Rising Faster Than Wages

When it comes to the housing market, two trends have dominated the headlines in 2019. A shortage of inventory, and a lack of affordability. Both of these issues will carry over into 2020.

Home prices in the U.S. have risen steadily over the past few years. In some cities, they rose at a much faster pace than wages and earnings. And that has created affordability issues for a lot of would-be buyers.

Research published by ATTOM Data Solutions earlier this year showed that home prices were climbing faster than wages in 80% of U.S. counties.

While this has improved over the past few months, there is still a chasm between home-price appreciation and income growth in many cities. And this has made renting the more attractive option in many parts of the country.

According to the ATTOM Data Solutions report:

“With home price appreciation increasing annually at an average of 6.7 percent in those counties analyzed for this report and rental rates increasing an average of 3.5 percent, coupled with the fact that home prices are outpacing wages in 80 percent of the counties, renting … is clearly becoming the more attractive option.”

A Sense of Urgency Among Buyers?

Given the outlook for rising home prices, buyers planning to enter the market soon might have a sense of urgency. If values continue to climb, as predicted, those who postpone their purchases until later in 2020 could end up paying more.

Of course, real estate conditions can vary widely from one housing market to the next. For evidence of this, we need look no farther than the latest S&P CoreLogic Case-Swiller Home Price Index.

Published at the end of October, that report showed a wide gap between some cities. Consider these trends:

  • In Phoenix, Arizona, home values rose by more than 6% from September 2018 to September 2019.
  • Prices in San Francisco, meanwhile, actually dipped slightly during that same 12-month period.

Conditions Vary Widely at the Local Level

The latest home-price outlooks for 2020 are mostly positive. But there are still “pockets” of depreciation happening in some parts of the country. Prospective buyers should be aware of this.

An October housing market report from the Greater Las Vegas Association of Realtors showed that the median home price in that city dropped 1% in October from the month before. Miami is another city where property values could dip slightly in 2020. Most of Silicon Valley falls into that boat as well.

But at the same time, there are plenty of U.S. cities where home prices are still rising — and are expected to continue climbing in 2020. In fact, most cities fall into that category (to varying degrees).

Idaho stood out in the CoreLogic report for having the most significant home-price growth among U.S. states during 2019. That’s largely the result of rapidly rising values in Boise and Idaho Falls.

This is why we encourage buyers to research their local markets, to get a better sense of what’s happening. National home-price outlooks for 2020 suggest that residential real estate values will continue to inch upward. But that doesn’t mean it’s happening in every city.

Good News on the Mortgage Front

While the home-price outlook might give buyers a reason to hustle, there’s plenty of good news on the mortgage front. Rates are still hovering at historically low levels, as they have been for months.

Last week, Freddie Mac reported that the average rate for a 30-year fixed mortgage loan dropped to 3.69%. At the start of 2019, that average was hovering in the 4.5% range. So it has come down considerably since then.

The latest forecasts suggest that mortgage rates could remain within their current range for the foreseeable future. Despite the usual ups and downs, of course.

Disclaimer: This story contains 2020 home-price outlooks from third-party sources not associated with the Home Buying Institute. Housing-related forecasts are the equivalent of an educated guess and should be treated as such.