In the dawn of the 2020s, Zillow predicts a more stable market and for Millennials’ housing tastes to begin to make an impact.
Homes will continue to shrink.
Zillow expects the median square footage of newly built, single-family homes will fall for the fourth time in five years as the sprawling, suburban homes that Baby Boomers coveted will increasingly become a relic of the past into the 2020s. Millennials, the largest group of buyers in 2020, have different tastes and lifestyles than their parents’ generation, with many preferring homes in urban areas with an abundance of amenities within walking distance.
The U.S. will not enter a recession in 2020.
As recently as July, half of experts surveyed by Zillow predicted a recession would begin in 2020. But the expected headwinds have thus far not materialized to knock the economy off track. Consumer spending has picked back up – reflecting strong consumer confidence – job creation is on a steady path and annual wage growth has stayed at or above a healthy 3% since October 2018.
Home value and rent growth will be slower and steadier.
Home value growth is expected to grow 2.8% through 2020, according to a Zillow survey of more than 100 housing experts and economists. That’s down a full percentage point from 3.8% annual growth as of November. Zillow expects rent growth to continue accelerating into the spring, before dipping below 2% by the end of 2020, down from 2.3% in November.
Mortgage rates will stay low, keeping housing demand high.
Mortgage rates fell consistently for much of 2019, touching their lowest levels in nearly three years. Zillow expects rates to remain low for the bulk of 2020, which would keep buyer demand strong. But low rates don’t help overcome the upfront hurdle of a high down payment in expensive markets, pushing buyers in these areas to fan out in search of areas they can better afford.
Sales will climb again after a downturn in 2018.
For-sale inventory is near historic lows, but that doesn’t mean sales aren’t being made. In fact, the low inventory is largely a result of high demand from buyers that snatch up homes as soon as they hit the market, and Zillow predicts they will climb in 2020. As the large Millennial generation ages more and more are reaching peak homebuying age each year. These buyers are benefiting from low mortgage rates, an increase in new construction permits and technology – such as Zillow Offers and other iBuyers – that is reducing friction in the market.
Color will make a comeback.
Goodbye, Hygge. Hello, color! Bold prints, lively wallpaper and brightly hued walls will bring the fun back to home design in 2020 after a decade in which Scandinavian modern design – neutrals, minimalism and clutter-free living – dominated retail and social media feeds. Expect a shift toward playful, creative design with color injected in unexpected ways in kitchen cabinetry and appliances, lighting fixtures and interior doors and moldings.