While 2020 continues to surprise us, somehow, someway, home sales are expected to hit their highest point since 2006 this year.
This, despite an ongoing worldwide pandemic and a contentious U.S. presidential election that’s less than a month away.
You’d think those types of events would give prospective home buyers pause, but they could actually be accelerating peoples’ plans.
6.2 Million Home Sales Expected for 2020
- The total includes both newly-built homes and existing home sales
- Would be the highest total since 2006, around the time home prices peaked
- Their low-end estimate is 6.08 million home sales, still 1% above last year
- Their high-end estimate is 6.4 million home sales, 6% above last year
While the year 2020 certainly got off to a rocky start, and resulted in obvious disruptions during the traditional spring home buying season, we appear to be back on track.
In fact, some 6.2 million homes are expected be sold by the end of 2020, per Redfin’s model forecast, a 3% increase from 2019.
That’d make 2020 the best year for home buying since 2006, back when real estate was flying high, and only years before it all came crashing down and ushered in the Great Recession.
This doesn’t mean we’re doomed once again – things were a lot different back then, namely mortgage underwriting guidelines.
In 2006, you could buy a house with zero down, stated income, and a subprime credit score. In fact, you could by a 4-unit investment property with zero down. Yikes!
Today, there are still zero down mortgage options, but they require full doc underwriting that takes into account your income, assets, and employment.
Of course, there are still lots of loan programs out there that only require questionably-low credit scores, like FHA loans and VA loans, but I digress.
Redfin actually has a few different outcomes for home sales, including a low-end forecast of 6.08 million homes sold, which would still be 1% more than 2019.
And a high-end forecast of 6.4 million, which would be 6% more than 2019. It’s all pretty impressive given the year we’ve had.
What’s Driving Higher Home Sales in 2020?
- The pandemic may have actually accelerated home buyers’ plans
- Renters living in urban areas are craving more space in the suburbs
- There are also 45 million first-time home buyers coming of age
- And of course, the record low mortgage rates don’t hurt either
The obvious answer might be record low mortgage rates, which are making it more appealing (at least emotionally) to purchase a home.
The other reason might be the desire to move somewhere that offers more space, such as a home in the suburbs versus an apartment in the city.
It seems the pandemic has caused folks to take a hard look at their situation, and perhaps seek out more stable living conditions.
Home sales had also been trending higher for the past few years, and with millions of Millennials and Gen-Zs coming of age, there are lots of tailwinds.
As I wrote a while back, 45 million Americans are going to reach the typical first-time home buyer age of 34 over the next decade.
This, coupled with limited inventory, will make home buying competitive for the foreseeable future, and supports my argument of skipping the starter home.
That might be especially true now that “more space” is high up on the list of home buyers wants and needs.
With regard to how the presidential election could affect home sales, Redfin notes that past elections have had minimal impact.
Since 1980, home sales actually increased an average of 0.4% in October and November of presidential election years versus non-election years.
But in the December of election years, the month where sales would likely close for offers made during November, sales typically fell an average of 1.5%, but quickly recovered by the same amount in January.
Of course, this isn’t just any year, so we’ll see how things play out.
Redfin surveyed home buyers and found that only 13% of respondents said the upcoming election has made them more hesitant to buy or sell a home, which was down from 20% in November 2019.
Read more: 2020 home buying tips
About the Author: Colin Robertson
Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.