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2020 Real Estate Outlook: Expert Predictions For Mortgage Rates, Home Prices, Tech And More

The 2019 housing market has been one of low rates, high demand and limited supply—particularly on the lower-priced end of the market.

Will 2020 be more of the same? According to experts, yes and no.

We spoke to six mortgage, real estate, and housing professionals. Here’s what they say is in store for the year to come:

Mortgage rates will stay low—or maybe go lower.

Mortgage rates currently sit at 3.75%, according to Freddie Mac’s most recent numbers—nearly a 1% difference from the monthly average a year ago. The drop in rates caused a surge in refinancing over the last few months, and purchase activity ticked up as well.

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According to Odeta Kushi, deputy chief economist at title insurance and settlement services provider First American, there’s “emerging consensus” that rates will remain low next year—likely somewhere between 3.7% and 3.9%, she says.

Forecasts from Freddie Mac and the Mortgage Bankers Association back this up, both predicting 2020 rates within this range. Fannie Mae actually predicts rates will clock in even lower, vacillating between 3.5% and 3.6% throughout the year.

Sean Hundtofte, chief economist for online mortgage lender Better.com, says that thanks to these continued low rates, refinancing should remain a popular choice in the new year. And for homebuyers, he says, they’ll “be able to afford more house than they would have otherwise.”

Prices will keep on rising.

Home prices will continue their climb upward, according to experts, largely thanks to tight inventory and high demand.

According to the latest home price forecast from property data firm CoreLogic, home prices should tick up by 5.6% by next September—up from the just 3.5% jump we saw this year.

As Daryl Fairweather, chief economist for real estate brokerage Redfin, explains, “Right now we aren’t seeing a ton of new listings. Without more listings coming on the market, there will be more competition starting off in early 2020 and that will lead to more price pressure.”

The problem will be worse on the lower end of the price spectrum. According to Ralph DeFranco, chief economist for mortgage insurer Arch MI, entry-level home prices will rise higher than incomes next year—and disappointing construction numbers will only compound the issue.

“Low interest rates and a shortage of starter homes will continue to push up prices,” DeFranco said. “This is especially the case for lower price points, since builders have tended to focus on more expensive, higher-profit houses and less on replenishing low inventories of entry-level homes.”

It seems the price growth may continue beyond 2020, too. Data from Arch MI shows the chance of home price declines at a mere 11% for the next two years. There are currently no states or metro markets projected to see prices declines in that period.

Inventory will be tight.

Housing inventory is going to remain limited for much of 2020, experts say. And interest rates and record-high homeownership tenures are a big part of the problem.

According to recent data from Redfin, the average homeowner is staying in their home 13 years—up from just eight years in 2010. In some cities, homeownership tenures are as high as 23 years.

As Kushi explains, “You can’t buy what’s not for sale.”

“While historically low rates increase buying power and make it more likely for potential buyers to attain their homeownership dream, they also increase the risk of a long-run housing supply shortage, which we predict will continue through 2020 and possibly intensify,” Kushi says. “As first-time buyers lock-in these historically amazing rates and existing owners refinance—in droves in recent months, everyone will stay put and not sell. Where’s the incentive?”

There’s a chance that increasing construction may offer some relief in the inventory department. Last month’s residential construction report from the Census Bureau saw building permits and housing starts both increase over the year. At the same time. builder confidence was at a 20-month high, according to the National Association of Home Builders.

Still, it may not be enough to meet the needs of today’s buyers, Kushi says.

“As for building new homes, builders have a reason to be cautiously optimistic, given pent up demand stemming from a strong economy, lower mortgage rates and continued wage growth,” she says. “However, building pace still lags behind historical standards, and it will likely take months before we can begin building at a pace that will support the demand.”

Millennials will keep up their homebuying streak, while Boomers hold up inventory.

Data from Realtor.com shows Millennials made up a whopping 46% of all mortgage originations in September—up from 43% one year prior. Meanwhile, shares of Baby Boomer and Gen X mortgage activity declined.

It’s no wonder, either. Millennials rank homeownership as one of their top goals in life—higher than even marrying or having kids—and with interest rates low and incomes up, it’s the right time to buy a home for many.

Unfortunately, they face an uphill battle. As Kushi explains, “Looking ahead, Millennials may be entering a tougher housing market in 2020. A limited supply environment, combined with growing demand and increased competition for homes, is accelerating home price growth once again.”

The Baby Boomer generation is part of the challenge for this younger cohort, as many are choosing to age in place—keeping more homes off the market than ever before.

In fact, a recent study from Freddie Mac shows that if today’s older adults—those born between 1931 and 1959—behaved like earlier generations, then an additional 1.6 million homes would have hit the market by the end of the last year.

As Kushi puts it, “The fate of Millennial homebuying to close out 2019 and into 2020 will depend on two factors: if there is anything for them to buy, and whether rising purchasing power stemming from increasing income and historically low mortgage rates can continue to outpace house price appreciation.”

The suburbs will be a big draw thanks to Millennial demand.

As home prices skyrocket, cash-strapped Millennials are looking toward more affordable places to put down roots—namely smaller, suburban towns on the outskirts of major metros.

The trend has led to an uptick in “Hipsturbia” communities—live-work-play neighborhoods that blend the safety and affordability of the suburbs with the transit, walkability and 24-hour amenities of big cities.

Melissa Gomez, an agent with ERA Top Service Realty in New York, has seen the trend in action.

“Being based in the boroughs of NYC, I see Hipsturbia happening every day,” she said. “As cities like New York become increasingly expensive, younger people and families are looking for more bang for their buck with real estate, schooling and everything in between. And slowly but surely, it is breathing new life into small towns outside of major urban hubs.”

The Urban Land Institute recently named Histurbia as one of its top real estate trends to watch in 2020.

As the report explains, “If the live-work-play formula could revive inner cities a quarter-century ago, there is no reason to think that it will not work in suburbs with the right bones and the will to succeed.”

The industry will continue to digitize. 

The mortgage and real estate spheres have been moving away from their manual, paper-laden processes in recent years, and 2020 will only see that trend expand further—especially as more tech-savvy Millennials enter the market.

As Hundtofte explains, “In 2020, we’ll continue to see Millennials growing their share of the mortgage market, which in turn, will serve as a catalyst to lenders to continue to rapidly innovate their technology offerings to meet the expectations of an audience more accustomed to an Amazon, Venmo-like experience.”

Though plenty of tech offerings already exist—from e-signing and e-notary software to fully-digital mortgage applications, automated income verification and more—Hundtofte says we’ll probably see these solutions start teaming up in the new year.

“Rather than compete with each other, we’ll see companies combining technologies across the board, from startups partnering with startups to startups partnering with legacy institutions,” he says.

Aaron Block, the co-founder of MetaProp—a venture capital fund focusing solely on real estate technology—says to keep an eye on the Airbnb and WeWork brands specifically in this regard.

On WeWork’s recent IPO blunder, Block says, “One major positive outcome of this year’s ‘DiePO’ is the plethora of ‘proptech’ innovation talent hitting the street. Some exciting new companies are being formed as we speak.”

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I’m a freelance writer and journalist from Houston, covering real estate, mortgage and finance topics. See my current work in Forbes, The Motley Fool, The Balance, Bankrate and The Simple Dollar. Past gigs: The Dallas Morning News, NBC, Radio Disney and PBS.

Source: 2020 Real Estate Outlook: Expert Predictions For Mortgage Rates, Home Prices, Tech And More

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Berlin Agrees Five-Year Rents Freeze To Tackle Housing Prices Boom

The local government in Berlin has agreed to freeze rents in the German capital for five years as the city is battling with skyrocketing housing prices.

The Berlin Senate’s majority, which is composed by the Social Democrats, Greens and the Left party, approved the decision last week after months of discussions.

The plans will be sent to parliament this month, where they are expected to be approved and to take effect in January 2020. They also include measures to cap subletting contracts.

“We’re entering new territory,” said Berlin Mayor Michael Mueller. “Others talk about it, but we’re actually doing it.”

The clamp down on rent rise, one of the most extreme decisions taken by a Western capital in recent times, is being followed with close interest by other world cities.

The plan was initially proposed by the Left party. Katrin Lompscher, the party’s head of urban development and housing, said the intention was to “ease the burden” on tenants after a property boom which saw rents doubling over the last 10 years.

German house-builders’ and property companies’ shares were hit hard on October 21st. Deutsche Wohnen, Berlin’s largest private landowner, saw its shares fall by 4.6%. Shares of Vonovia SE, the largest property company in the country, fell as much as 1.6%.

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A separate grass-root initiative attempting to force Berlin’s local government to expropriate over 200,000 properties from large landlords is ongoing.

In August, Forbes.com revealed that Berlin is the city with the highest growth for prices of luxury real estate in the world.

For the second year in a row, the German capital had recorded the strongest price growth rate globally, with a 12% increase year-on-year – according to data from Knight Frank.

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I am a business reporter focusing on real estate, retail and technology. I am currently Chief Investigative Reporter at Property Week, where I lead the magazine’s investigations unit. I have been nominated as Best Print Writer at the BSME Awards in 2019 and 2018 and as Best Journalist – Infrastructure, Development and Construction at the British Journalism Awards in 2017. Prior to that, I worked as a freelance for a number of publications across the U.K., France and Italy including The Bureau of Investigative Journalism and La Repubblica. I hold an MA in Investigative Journalism from City University of London and an MA in French literature from Ca’ Foscari University of Venice.

Source: Berlin Agrees Five-Year Rents Freeze To Tackle Housing Prices Boom

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Redfin Reports Better-Than-Expected Earnings As Real Estate Tech Startups Seize Momentum

Better-than-expected second-quarter earnings lifted shares of discount real estate brokerage Redfin in after-hours trading Thursday.

Revenue for the quarter was $197.8 million, up 39% from a year ago, while the company reported a net loss of $12.6 million, compared with income of $3.2 million in the second quarter of 2018. Net loss per share was $0.14. All measures were better than analyst estimates.

“The second quarter is a turning point for our company,” CEO Glenn Kelman said in a statement, pointing to expansion of the company’s mortgage business and “instant-offers,” Redfin’s on-demand home-buying service. “The years of work we’ve invested in each of these businesses are now positioning us to be the first to deliver a complete solution at a national scale for people moving from one home to the next.”

Since 2006, the Seattle-based company has expanded to 90 markets, selling more than 170,000 homes worth upwards of $85 billion with a promise of lower transaction costs. Redfin pegs its market share at 0.94%.

But progress on its loftier goal—to make the whole residential real estate process more consumer friendly through tech—has been slow. Most U.S. housing is bought and sold the same way it has been for decades. Thursday’s better-than-expected report comes as a number of real estate companies new and old are announcing new digital-first services they also claim will remove friction.

The startup Opendoor said earlier Thursday that buyers can now use its app to browse, book self-guided tours and submit bids on any home for sale in Dallas-Fort Worth, Phoenix and Raleigh-Durham. Opendoor’s primary business so far is high-tech home-flipping. Homeowners sell their homes to the company online, and then Opendoor spruces up the place and tries to quickly resell it. Zillow believes a similar model will make up the majority of its business within five years.

Compass, a direct Redfin competitor in pairing human agents with homegrown software, on Tuesday announced it had raised a $370 million round of funding at a $6.4 billion valuation. (Redfin’s market cap is about $1.6 billion.) Last week, Realogy—parent company for brokerage brands including Coldwell Banker, Century 21 and Sotheby’s International Realty—announced a partnership with Amazon to connect home buyers with agents.

It is not yet clear whether Redfin will come out ahead when, and if, technology manages to really change the makeup of the residential real estate market. Shares have gained 27% so far this year, although the closing price of $17.72 on Thursday was down from a 2019 peak of $23.45.

For the third quarter, Redfin is forecasting revenue between $223 million and $233 million, which would equal year-over-year growth of between 59% and 66%. Net income is expected in the range of $3.4 million to $6.4 million.

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I am a staff writer covering real estate. Come for the outrageous homes, stay for the insights on what gets built and why. Previously I wrote about the future of money including fintech, Millennials and the economy at large, as well as news from the markets.I graduated from the University of Pennsylvania where I majored in English and minored in art history but mostly worked at the student newspaper – The Daily Pennsylvanian. You can follow me on Twitter @SamSharf and email me at ssharf@forbes.com.

Source: Redfin Reports Better-Than-Expected Earnings As Real Estate Tech Startups Seize Momentum

Foreign Investment In U.S. Real Estate Plunges

The U.S. housing market has hit another stumbling block, as purchases of homes by foreign buyers dropped a dramatic 36%, according to a report by the National Association of Realtors.

The data comes from an annual survey of residential purchases from international buyers, which found that foreign buyers, led by the Chinese, purchased existing properties with a total value of $77.9 billion from April 2018 through March 2019, compared to properties totaling $121 billion in the preceding 12 months.

Investors from China exited the market most dramatically, with purchases falling 56% to an estimated $13.4 billion worth of residential property.

There are many reasons for the plunge, including less economic growth abroad — growth slowed to 3.6% in 2018 and is on track to slow to 3.3% in 2019 — tighter controls on outside investment by the Chinese government, a stronger U.S. dollar and a low inventory of homes for sale, according to Lawrence Yun, NAR’s chief economist and fellow Forbes.com contributor, who called the magnitude of the decline “quite striking, implying less confidence in owning a property in the U.S.”

Most foreign purchases were in Florida, followed by California, Texas, Arizona, North Carolina and Illinois.

While this is bad news for the overall U.S. market, it won’t make a crucial dent in the New York market, as foreign investment hasn’t been part of the market for some time, those in the industry say.

Leonard Steinberg, a broker in New York City with Compass, referred to the recent high-profile Manhattan purchases billionaire hedge-fund manager Ken Griffin, who closed on a $233 million penthouse earlier this year, and Amazon founder Jeff Bezos, who recently bought three condos for a combined $80 million.

“The reality of it is the Chinese billionaire or Russian oligarch were a small fraction of the market,” Steinberg says. “Your best foreign buyers are American buyers—just from other parts of the country.”

Svetlana Choi, a broker with Warburg Realty, said there is still foreign investment in New York, just not for ultra-luxury properties.

“While there are still Chinese investing, they would prefer to invest in an apartment building in Flushing that can bring a far larger return, than an empty super expensive apartment in New York City,” Choi says.

Noemi Bitterman, also of Warburg Realty, notes that as the market continues to decline, more investors may come through.

“My feeling is that now is definitely a time to buy because current prices reflect fair market value and not inflated prices as we saw six to 12 months ago,” Bitterman says. “The market has adjusted and prices are where they should be.”

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I’ve been working as a journalist in the New York metro area for more than a decade and have developed a specialization in luxury real estate

Source: Foreign Investment In U.S. Real Estate Plunges

Blackstone Calls Logistics Its ‘Highest Conviction’ Real Estate Idea After Striking $18.7 Billion GLP Deal

At Blackstone Group, the world’s largest private equity firm, with $512 billion in assets under management, few properties or companies are out of reach. So when the firm strikes a record-setting deal and anoints the sector as a top firm-wide idea, it’s worth listening to.

In real estate, Blackstone is doing just that when it comes to logistics space—the warehouses where the orders of Amazon and other e-commerce giants are delivered in bulk, sorted and sent out to customers. On Sunday evening, the firm disclosed an $18.7 billion deal for the U.S. logistics assets of Singapore’s GLP, inking the biggest private real estate deal in history. And Blackstone isn’t coy about its optimism for the real estate that houses America’s increasingly e-commerce-oriented supply chain.

“Logistics is our highest conviction global investment theme today, and we look forward to building on our existing portfolio to meet the growing e-commerce demand,” Ken Caplan, co-head of Blackstone’s real estate business, said in a statement.

It’s a bold statement coming from Blackstone given that logistics space is probably only noticeable to the average American as they drive along the interstate or make landings at airports on a clear day.

The warehouses Blackstone is buying are often massive white windowless and logo-less boxes bigger than a football field. They sit adjacent to airport runways, highways, large ports and rail hubs. Increasingly, inside these buildings is what looks like science fiction: Massive robots move and sort palettes of goods, drones check inventories, and orders are sifted and sorted on conveyors that have the sophistication of an automotive assembly line.

For Blackstone, Sunday’s deal is a major doubling down on the U.S. logistics market. Its $140 billion real estate investment arm rolled up logistics warehouse operators and formed Indcor, which it sold to GLP for $8.1 billion in 2015. Then the firm’s real estate gurus set their sights on Europe, building pan-European giant Logicor into a $13.8 billion logistics behemoth that was sold to China Investment Corp. in 2017. In buying GLP’s U.S. business, Blackstone is bulking back up with familiar assets, acquiring some 179 million square feet of urban, in-fill logistics assets nationwide, doubling the size of its existing footprint. It also bought back a piece of Logicor from CIC in late 2017.

Blackstone’s global opportunistic real estate funds will acquire 115 million square feet of GLP space for $13.4 billion and its income-oriented non-listed real estate investment trust, BREIT, will acquire 64 million square feet for $5.3 billion. “Our global scale and ability to leverage differentiated investment strategies allowed us to provide a one-stop solution for GLP’s high-quality portfolio,” said Caplan.

Blackstone has its pick of real estate ideas to crow about.

It is one of the biggest office, hotel and single and multifamily property owners in the United States and globally. Its $140 billion portfolio contains 231 million feet of office space globally, 151,000 hotel room keys, 75 million feet of retail real estate, and 308,000 residential units and homes. It built and remains a top shareholder of Invitation Homes, an NYSE-listed single-family landlord with a portfolio of 80,000 homes nationwide. In Chicago, Blackstone owns the Willis Tower, and in Las Vegas it owns the trendy Cosmopolitan hotel and casino. By square footage, logistics space now appears to be Blackstone’s top real estate holding.

The $18.7 billion price tag is a coup for GLP, the seller. Based in Singapore, GLP is was cofounded by entrepreneur Ming Zei Mei, who spun out the international logistics space of Prologis, mostly based in China, Brazil and India. Now GLP, short for Global Logistics Partners, operates 785 million square feet of space, with more than half in China.

Once listed in Singapore, GLP was taken private in 2017 by its cofounder and a consortium of Asian investors including HOPU Jinghua (founded by Goldman Sachs’ former China chairman), Hillhouse Capital and China Vanke Co. In addition to logistics space, GLP is becoming a force in real estate and private equity asset management, with $64 billion under its watch. For the firm, Sunday’s deal is a watershed, reportedly receiving interest from Prologis, a publicly trade real estate investment trust that is the leader in U.S. logistics space.

“GLP was able to leverage our deep operating expertise and global insights in the logistics sector within four years to build and grow an exceptional portfolio,” Alan Yang, chief investment officer of GLP, said in a statement. As it recycles capital, the firm remains bullish on the U.S. “We are looking forward to expanding our footprint in the United States to continue to seize key opportunities in the U.S. market,” Yang said.

For more on Logistics:

See our 2017 feature on Prologis, the world’s logistics leader

Also see our mention of GLP in our coverage of a bet Brookfield made in China.

I’m a staff writer at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, M&A and banks.

Source: Blackstone Calls Logistics Its ‘Highest Conviction’ Real Estate Idea After Striking $18.7 Billion GLP Deal

Buying and Selling Property With Bitcoin Is More Complex Than It May Seem

Buying and selling property using cryptocurrency is less straightforward than was first assumed. The handful of mortgage lenders and realtors who were initially keen are now reluctant to accept crypto deposits due to money laundering fears. Until there is greater clarity concerning crypto regulation, due diligence procedures and taxation, potential participants are opting to wait on the sidelines.

Source: Buying and Selling Property With Bitcoin Is More Complex Than It May Seem – Bitcoin News

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