We are well on our way in to 2020! 2020 brings a new decade, the ONLY year you may live to see where the first two digits match the second two digits, an election year, the Summer Olympics in Tokyo, the Mars 2020 mission, a new Washington Monument, 400 years since the sailing of the Mayflower, “The year of the Electric Truck”, and the opening of the Yahoo! Time capsule…just to name a few! The optimism surrounding the beginning of a new decade is a contagious feeling that we all hope to hold tightly for a full 365 days. With this new decade, comes questions surrounding our economy and housing market. Is it sustainable? What will happen? Aren’t we due for a recession? Before we answer those questions, let’s look at an overview of 2019.
In 2019, we saw wage increases, unemployment rates reach 50-year lows, mortgage rates decrease from 2018 and the housing market, fueled by the strong economy, remained on fire throughout the entire year. Pending sales increased by 2.5% finishing the year at 2,492. New listings were up by 2.7% finishing the year at 637 active homes and a total of 3097 homes were listed for sale. Median house prices in the Gallatin Valley were up by 6.2% and the median home price for a single-family home in Bozeman City Limits finished at $460,000. New construction was no stranger to this growth either. Builder activity in the Gallatin Valley grew, but still, the total number of homes and units built remains lower than the need for the long-term supply. Will 2020 see this same growth or are we due to see a softening of the market?
This exact question sparked an in-depth conversation with our agents at our most recent office meeting. We asked our agents, “What is the most common question you are asked when people find out you are a real estate agent.” The overwhelming answer was, “What do YOU think the housing market will do in 2020?” People are curious as we are due for a cool down in the market, but will it be this year?
In a recent article, The Great Divide, written by Joe Bousquin in the December 2019 issue of Builder Magazine, the overall consensus is yes, we are headed for a potential slowdown in the economy, but we are not headed for another Great Recession. Robert Dietz, the chief economist for NAHB states “his own economic tables don’t show an actual recession ahead yet, but more of a soft patch. And he emphasizes, that in a post-Great Recession world, it is critical to think about what a recession in today’s market would really look like.” He continued by saying, “The problem is, when you use the word ‘recession’ today, people immediately think we’re going to have another Great Recession, but that was a once-in-a-multidecade event marked by the combination of both an economic downturn and an old-school financial panic. When we talk about a downturn in the current economy, we’re talking about something like the early 1990s or 2000s, where there were maybe a couple quarters of negative growth and some slow or negative job creation.”
While we don’t have a crystal ball to predict the future, we do believe in constant study of past housing trends, current market conditions, and studies from well know economists so we can educate our clients. In this same article, Mark Boud with Metrostudy states “This will not be a housing-led recession. This next recession, we don’t feel will be nearly as deep as the previous recession. Nonetheless, it’s a recession and during recessions, demand for housing tends to fall.” With that being said, as we enter 2020 just as strong as we ended 2019, we don’t anticipate seeing the cool down this year. If anything, we will leave you with Mark Boud’s prediction calling for a “recession” to start in the latter half of 2021 or beginning of 2022 and describes it as only being a “soft-landing.”
So, when is the best time to buy real estate? 5 years ago! As Mark Twain says, “Buy land, they’re not making anymore of it.” But, when you do consider buying or selling as we move through the next couple of years…make sure you buy smart, sell educated, and invest with strategy.