Home Beat – A Cracked Crystal Ball?
Predicting 2020 Housing Trends
The 2019 real estate market exhibited a surprising amount of momentum. In a year when many financial experts theorized that the housing market was nearing a crash or a correction, the real estate industry remained steadfast. What will 2020 bring to the Merrimack Valley? Although some data suggests a strong continuation of a healthy market, the combination of an election year and underlying exigencies creates a degree of uncertainty.
One of the longstanding realities of Middlesex County is lack of inventory. The most recent market statistics provided by the Northeast Association of Realtors (NEAR) confirmed this. According to NEAR, Dracut featured 57 houses on the market in September 2018. One year later, the town’s housing inventory was 39% lower, with only 35 homes for sale. This trend extended to Lowell, Lawrence, Methuen and many other cities and towns in the Merrimack Valley, and you can look for it to continue this spring.
Then there are the problems faced by young buyers. Methuen native and eXp Realty agent Chris Lefebvre understands the challenges awaiting millennials who are looking to buy a home. “It is estimated that about 33% of all buyers are millennials,” Lefebvre said. “Currently the demand for homes is far greater than the supply. Older ‘downsizers’ and cash investors hold stronger positions when purchasing homes due to their available liquidity. Many of the homes in the Merrimack Valley are receiving multiple offers, making it very competitive.”
This challenge could have a negative impact on the long-term housing market. In an interview that appeared in the May/June 2019 edition of mvm, North East Association of Realtors President Mark Kavanagh highlighted the significant lack of new construction in less expensive homes.
After hearing Kavanagh’s comments, Lefebvre agreed with the implications facing buyers in the lower price ranges. He has seen the effect firsthand. “The median sales price of single-family homes in Methuen during the month of September 2019 hovered around $400,000,” he said. “Right now, some of the new construction in Methuen is selling for the inflated price of $600,000, sometimes over $200,000 more than the median sales price.”
This illustrates a current problem with newly generated inventory. Builders are constructing homes outside the price range of many first-time buyers. These higher priced properties generally attract smaller pools of buyers and take longer to sell. Although the “move-up” buyers will likely sell the old homes they have outgrown (sometimes in the lower price range), the overall decrease of inventory in Massachusetts skews the opportunities for new buyers. This leaves Massachusetts with a market imbalance that will likely continue in 2020.
Possibly the most important and unpredictable factor is the overall health of the market. For years, financial analysts have been predicting a market correction, and many real estate agents agree that we are overdue for a decline in real estate values. According to Lefebvre, however, the prices may continue to rise throughout 2020. “The median and average prices have been rising since 2010,” he said. “The stock market is still going strong, and signs of growth are still present.”
Ultimately, it’s impossible to predict with certainty what the real estate market will do, and many industry professionals aren’t comfortable with taking a definitive position on what will happen during the early months of 2020, but the underlying complications in the local market are clear. On the surface, the average price of homes and the consistent increases in the value of real estate positively affect outlook, but we shouldn’t ignore the current imbalance between our local inventory and perspective buyers.