While I do not profess to have a crystal ball, as a top producing Realtor and policy geek, I have my finger on the pulse of what is going on and offered a few key points when interviewed.
(1) When asked if the Sacramento real estate market will crash in 2020: NO. I do not believe the Sacramento real estate market will crash in 2020. The end of 2019 has been super busy and spring buying frenzy seems to have arrived early. Sellers - take note. You may want to list your homes a little ahead of schedule. There is not much on the market right now and A LOT of buyers out there home shopping. I think there were many factors that coincided with the market slow down at the end of 2018 that were not present during 2019 - interest rates increased in 2018, ambient smoke and the poor air quality kept many would-be buyers inside, and there was a rhetoric-filled election. In 2019, interest rates significantly declined making mortgages a little more affordable, there was less chaos during fire season, and it has been a non-election cycle. Home price increases in 2019 slightly outpaced inflation and were up a bit, but not drastically so, and overall there seemed to be a more workable balance between buyers and sellers in the market.
(2) When asked if buyers will "show up" in 2020: YES. The buyers are out there and they are motivated. Interest rates remain low, and many predict continued downward pressure on interest rates in 2020 as the global economy sorts out trade wars and reconciles other geopolitical tensions. With rates likely to remain low, I think home buyers will continue to be extremely motivated to buy. I do think home prices will rise in 2020 slightly, probably on a similar trajectory as what we have experienced in 2019. In Sacramento I do see a good amount of new housing inventory coming to market, though unfortunately not enough of it will be at price points targeted at entry-level buyers. There are not enough new homes at the more affordable end of the price spectrum to satisfy that demand. Every little bit of construction helps though. Move-up buyers of new construction homes should still free-up inventory when selling their a smaller homes that entry-level buyers can purchase.
(3) When asked if there will be a recession in 2020: DOUBTFUL. At least not one of much magnitude, if at all. It seems like for probably the last 4-5 years people have expressed concern about a looming recession, as if the decade long economic expansion is destined for a catastrophic end. Our national, state and local economies seem to be humming along right now. And if we were to experience an economic slow-down, I doubt it would be caused by fraudulent lending practices and collapse of our financial system as in 2007. Previous recessions did not have a devastating impact on home values and I doubt values would suffer a collapse of a similar magnitude as we saw in the Great Recession.
(5) When asked about my most "out there" forecast or trend: ADU's! I am optimistic that 2020 becomes the year of the Accessory Dwelling Unit (ADU). Recent legislation has mandated city/county application streamlining and the "by-right" ability of residential property owners to add ADUs to their properties. I hope that MANY homeowners look to construct them. We absolutely need more affordable places for people to live. There are many parcels in greater Sacramento that could easily accommodate ADUs, whether that means converting existing space like a garage or basement to an ADU, or constructing a freestanding ADU Casita in the backyard. We could have thousands of mini-infill projects all over our region adding more housing with affordable rents.
(6) When asked how can more people afford to buy Sacramento homes: IT'S COMPLICATED. In part because a lot of people who want to buy homes can afford to buy homes, but they do not know they can afford it. They do not know enough about the purchase process to know they can qualify for a mortgage. I speak to people all the time who think they must have a 20% downpayment to purchase a home, when in reality there are many downpayment assistance programs available to people with stable employment and decent credit. There are also many low-downpayment programs that require only 3-5% down. In October, the Sacramento Association of REALTORS sponsored an extremely well-attended educational workshop in Oak Park for this purpose. There are other local organizations that promote similar workshops as well.
(7) When asked if Millennials are buying homes: YES. About a third of my transactions this year in 2019 involved a Millennial purchaser, and in my transactions that age bracket seems to represent an increasing number of home buyers. I expect that will continue to trend upward in 2020.
(8) And lastly, when asked about if I see Baby Boomers downsizing: KINDA. I have seen in my own transactions that the Boomers who are selling are relocating out of the area to be closer to family. The boomers who I am working with seem to be making more lateral moves -- with playrooms and bedrooms for the grandkids when they come over. I talk to many other Boomers who would love to downsize and move closer to family, but since they have owned their homes for decades, they face a steep increase in property taxes if they sell their homes and move into another county. Generally those Boomers decide not to sell. If there are reforms in 2020 that allow more Boomers to transfer their property tax base I would expect a significant increase in the number of Boomers who sell and downsize. The California Association of Realtors is currently signature gathering for another ballot initiative that, among other things, would allow for property tax basis transfers for seniors anywhere in the state.
So with all that...I look forward to a great 2020. 2018 lead to an extremely productive and busy 2019, and I believe all that will continue into the new year. Cheers!
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