U.S. Real Estate Market Trends & Projections For 2020

The US Real Estate Market is constantly changing and evolving, as does the opportunities it brings. Whether you are a real estate professional, new or seasoned investor or a potential homeowner, the following US map and market analysis will help you better understand the current landscape. Click on a state below to get started!

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Key Takeaways

  • The U.S. real estate market is better off than it has been in recent history, but there is still plenty of room for improvement.
  • Many of the most prominent U.S. real estate trends look to be working in favor of investors.
  • The U.S. housing market needs to pick up the slack in a few key indicators to truly realize its potential.

The U.S. real estate market began 2020 with every intention of answering several important questions: Will inventory rise enough to satiate demand? Will the Fed feel confident enough in the economy to continue increasing interest rates? Will homes continue to appreciate at a historical pace? Perhaps even more importantly, would U.S. real estate market trends suggest the industry is on a good trajectory?

Prior to the new decade, and even a few months in, the U.S. real estate market was firing on just about every cylinder. The only thing holding back the national housing sector from realizing its true potential was a lack of available inventory. Other than insufficient listings, everything else was about as good as anyone could have asked for. On top of the housing sector’s performance, the economy was incredibly healthy. All things considered, the U.S. real estate market looked poised to post another strong year.

It is worth noting, however, that the introduction of the Coronavirus and “shelter-in-place” orders issued by the government have tempered expectations levied on the national housing market. No more than a month into 2020, the housing sector was looking more and more likely to break records and usher in a spring selling season unlike any that had come before it. Now, with the first quarter officially in the books, expectations have changed dramatically.

Precautions such as social distancing and quarantining have not only brought the housing market to a standstill, but the entire U.S. economy as well. The inability to conduct what were once simple, daily tasks has essentially put everything on hold. Simply meeting with a real estate agent or mortgage lender is out of the cards for a lot of people. That said, the momentum generated from nearly a decade’s worth of positive growth in the housing sector won’t be held in check for too long.

As news of “reopening” the country spreads and businesses are phased back, the U.S. economy will persevere, just as it always has. Pent-up demand within the housing sector, in particular, should break through sooner rather than later. In fact, activity within the U.S. real estate market could very well serve as the catalyst the economy needs to remove itself from this temporary lull. Demand appears to have remained intact, and an influx of buyers could be just what this country needs to get back up to speed.

That’s not to underestimate our current situation, but rather suggest there is light at the end of the tunnel. As things currently stand, there are several obstacles that need to be overcome in order for the national real estate market to live up to its potential, which begs the question: What does the current state of the American housing market mean for today’s investors? What does the real estate investing landscape look like for investors across the country, now and for the foreseeable future?


Real Estate Market Overview [Updated 2020]

Heading into 2020, the market was healthier than it had been in quite some time. Thanks largely to a stronger economy, more prospective buyers wanted to actively participate in the market. Even then, however, buying was proving difficult because of a lack of inventory; there simply weren’t enough listings to meet the demand of ready and able buyers. As a result, the market leaned very heavily in favor of sellers.

Due to a distinct lack of inventory and the market’s inability to meet demand, prices continued to march upwards at the beginning of 2020, to the point that they are prohibiting many buyers from actually participating. Prices were simply too high, even for those who were in the market to buy.

At the start of 2020, the median home value in the United States was on the brink of appreciating for an eighth consecutive year (it was around the second quarter of 2012 when prices started to recover from the Great Recession). However, the market was presented with something nobody could have ever expected: COVID-19, otherwise known as the Coronavirus.

By the end of the first quarter, the severity of the Coronavirus was realized. The pandemic, along with “shelter-in-place” orders, had every industry retracting their previous future forecasts and replacing them with more tempered expectations, and the housing market was no exception.

It became readily apparent that the economy would take a hit because of government-mandated quarantine orders. In lieu of less activity (across every industry), economists are expecting the housing market to “dip” temporarily. If for nothing else, the lack of available listings before the pandemic is most likely going to be exacerbated by more homeowners taking their listings off the market because of the virus. Inadequate inventory levels are going to drop even lower, which would usually serve to increase prices. However, the lack of activity will simultaneously keep competition on the sideline and decrease prices.

According to Realtor.com®’s April Monthly Housing Market Trends Report, “National inventory declined by 15.3 percent year-over-year, and inventory in large markets decreased by 16.0 percent.” Furthermore, “The inventory of newly listed properties declined by 44.1 percent over the past year, and 45.4 percent in large markets, as sellers paused in response to COVID-19.”

Inventory levels have already dropped, and the nation’s median home value is starting to reflect the decline. According to Zillow, the U.S. median home value dropped about $1,000 from March to April. Looking ahead, Zillow expects the U.S. median home value to drop about 1.5% over the next 12 months. Fortunately, the drop is only expected to be temporary, and there’s no reason to think the momentum the country had before the pandemic won’t pick up sooner rather than later.

It is important to note the opportunity presented to real estate investors by the current situation. While tragic and unfortunate, drops in the market (regardless of how big or small they are) often result in great buying opportunities.

Coronavirus And The Real Estate Market

The introduction of the Coronavirus and the real estate market aftermath couldn’t have been predicted prior to 2020. At that time, projections had U.S. real estate trends breaking records at the higher end of the spectrum. Nonetheless, things haven’t exactly gone according to plan. The presence of the Coronavirus has brought the real estate market to a temporary halt. A lack of frontline workers and “shelter-in-place” orders have made it difficult—if not impossible—to maintain the momentum we had going into this year.

Despite the current environment, however, the current state of the real estate market is only temporary. In fact, the latest drop in inventory and prices should be seen as a great opportunity for real estate investors across the country. A temporary lull in appreciation (long or short as it may be) may significantly improve profit margins when the time comes to make a purchase. Interest rates are historically low, suggesting traditional lending may be the key to a buy-and-hold strategy. If that wasn’t enough, there are plenty of other reasons today’s real estate investors should be excited about the altering red estate landscape. For more information on the Coronavirus and the real estate market, click here.

The Top U.S. Real Estate Markets

Real estate is incredibly local, and every market exhibits inherently unique fundamentals. The health of the local job sector, foreclosure rates, housing inventory, and a number of other fundamentals are all relative to each state’s current position. Consequently, the criteria used to define a “top” real estate market are almost entirely dependent on the individual looking to invest. After all, what one investor may be quick to write off, another may covet. That said, there’s one objective indicator real estate investors must account for each and every time they evaluate a market’s potential: opportunity. A truly great real estate market is capable of granting investors the ability to, well, invest.

While price, inventory, demand, and competition are all of the utmost important factors to consider in a given market, they all mean nothing if there are zero opportunities. As a result, investors will want to place the odds in their favor and set up shop in states where they are most likely to land a deal. However, it’s not just opportunity that sets great markets apart; opportunity needs to be complemented with attractive profit margins.

Here’s a list of some of the top U.S. real estate markets for investors to consider in 2019:

  • Florida: With a foreclosure rate of 0.39%, the Florida real estate market had one of the nation’s highest distributions of distressed properties through the first six months of the year. In fact, Florida was home to four of the top five markets with the greatest annual increase in foreclosure starts over the first six months of 2019: Orlando, Jacksonville, Miami and Tampa Bay. The sheer volume of distressed properties in Florida bodes well for real estate investors looking to acquire deals at a discount.

  • Pennsylvania: While the foreclosure rate isn’t nearly as high as Florida (1 in every 2,458), Pennsylvania awards patient investors with another unique opportunity: attractive returns. Three of the eleven markets in which investors were able to double their return on investment (ROI) in the first quarter of this year were in Pennsylvania: Pittsburgh (131.2%), Scranton (112.0%), and Philadelphia (100.0%).

  • Tennessee: The Tennessee real estate market has experienced a bit of a resurgence in 2019. As a result, the distribution of distressed properties in Tennessee is considerably lower than the first two states on this list ( 1 in every 3,961). Despite the lack of distressed homes, however, two of Tennessee’s largest markets saw investors double their ROI: Knoxville (105.0%) and Memphis (79.2%). In fact, Memphis was so attractive to investors that it boasted the nation’s highest flipping rate in the first quarter of this year.

  • New Jersey: New Jersey boasts the worst foreclosure rate in the entire country, with one in every 1,173 units facing some form of distress. Therefore, it’s reasonable to assume investors should have an easier time finding motivated sellers in The Garden State. Atlantic City, in particular, appears ripe with opportunity for investors, as one in every 666 housing units is currently distressed, making it the worst metropolitan foreclosure rate in the entire country. Despite the rampant foreclosure rate, however, no other city saw a larger appreciation rate than Atlantic City in the second quarter of this year (16%).

  • Ohio: With a foreclosure rate of 0.30%, Ohio was recognized as one of the states with the highest foreclosure rates in the first half of 2019. However, two of Ohio’s biggest cities (Columbus and Cleveland) offer today’s investors some great opportunities. Columbus, for example, saw median home values appreciate by as much as 8.1% in the second quarter of 2019. Investors in Cleveland, on the other hand, saw the average return on investment reach 100.0% in the first quarter of this year.

U.S. Housing Market Overview

  • Median Home Value: $229,000
  • 1-Year Appreciation Rate: 5.2%
  • 1-Year Appreciation Forecast: 2.2%
  • Median List Price Per Square Foot: $156
  • Median Listing Price: $289,900
  • Median Sold Price: $235,500
  • Median Rent Price: $1,735
  • Percent Of Homes With Negative Equity: 8.2%
  • Listings With Price Cuts: 17.5%
  • Average Days On Market: 29
  • Percent Of First-Time Buyers: 32%
  • Percent Of Vacation & Investment Buyers: 11%
  • Percent Of Cash Sales: 19%
  • Months Of Inventory: 4.2
  • Total Housing Inventory: 1.89M

Median Home Prices in the U.S.

At its lowest point of the latest recession (around March 2012), the median home value in the United States bottomed out at approximately $148,000. Since then, several indicators have combined to boost values across the country. Namely, an improved economy, increased demand, and a lack of available inventory have all served to increase the median home value in the United States for seven consecutive years. In the last year (alone), the median home value increased 5.2%, which has helped prices get to where they are today: $229,000.

The entire U.S. real estate market is in nothing less than a hot seller’s market. With the way things are currently going, it’s reasonable to expect prices to increase for the foreseeable future, albeit at a slower rate. In fact, appreciation rates may struggle to reach even half of what they were last year. With prices now at historic highs, Zillow is forecasting a 2.2% increase over the course of the next 12 months.

The tempered forecast isn’t necessarily an indictment on the U.S. real estate market as a whole, but rather a sign that things may be returning to “normal.” If for nothing else, prices have inched higher and higher for quite a while, effectively pricing many prospective buyers out of the market. With news of the tempered increases, more buyers may finally be able to actively participate in the market, which bodes well for just about everyone in the industry, including real estate investors in every state.

Median Rent Prices in the U.S.

According to Zillow, the median rent price in the United States is $1,735. Not surprisingly, however, two-bedroom and one-bedroom units are going for less, $1,191 and $960 respectively. At their current level, national rents have increased 1.6% year-over-year. Despite the increase, growth in rates remain modest compared to previous years (especially from 2014 to 2017, when year-over-year increases reached as high as 3.6%).

The rate in which today’s rents are increasing lags slightly behind the overall rate of inflation. Perhaps even more importantly, rent increases trail behind the growth in average hourly earnings, which have increased by 3.2 percent over the past twelve months. As a result, renters should find renting more affordable, which bodes well for both tenants and landlords. Passive income real estate investors should find vacancies slightly harder to come by when their properties are more affordable to the average renter.

Several markets have been experiencing larger than average increases in rental rates. Henderson, NV, in particular, owns the nation’s fast rent growth over the course of the last year. With an increase of 4.7% over the last 12 months, Henderson’s year-over-year rent growth has nearly tripled the national average. Other cities with higher than average rent increases include:

  • Mesa, AZ: 4.4%
  • Las Vegas, NV: 3.9%
  • Phoenix, AZ: 3.7%

Foreclosure Trends & Statistics

The U.S. real estate market has seen its foreclosure filing rate decrease for the better part of a decade. Since 2010 (when foreclosure filings were at their most recent peak), the number of homes that have entered into the foreclosure process in the first half of the year has declined for the ninth consecutive year. With 296,458 foreclosure starts through the first half of 2019, the number of foreclosure filings initiated through the first half of the year has dropped 18% from the same time last year, and a staggering 82% from their high of 1,654,634 in the first six months of 2010. There’s no doubt about it: nearly ten years of data confirms that the number of homes entering into foreclosure in the first six months of the year has declined dramatically with each passing year.

The precipitous decline in foreclosure activity over the last decade has alleviated a great deal of pressure facing states with relatively high foreclosure rates. For years, in fact, many states were overburdened with an influx of foreclosures following the last downturn; there were simply too many distressed homes for the courts to process, and a backlog developed overtime. However, the recent decline in foreclosure filings has allowed once backlogged states to process more of their foreclosures, and faster nonetheless.

Halfway through 2019, the foreclosure process (from notice to completion) took an average of 716 days; that’s four days less than the same time last year, but 119 days shorter than the first quarter of this year. The states with the shortest foreclosure timelines were:

  • Mississippi: 195 days
  • Minnesota: 226 days
  • Virginia: 228 days
  • Alaska: 242 days
  • Maine: 277 days

There are several states with considerably higher foreclosure timelines. Due, in large part, to higher rates and more “red tape” surrounding the process, foreclosure timelines are longest in the following states:

  • Hawaii: 1,611 days
  • Indiana: 1,360 days
  • Florida: 1,073 days
  • New York: 1,057 days
  • New Jersey: 982 days

“Of course, you still have pockets across the nation where foreclosure activity is seeing some flare-ups,” said Todd Teta, chief product officer at ATTOM Data Solutions.

Despite the downward trend in foreclosure filings on the national level, some states have seen increases in foreclosure acuity. Florida, in particular, boasts several cities with some of the worst foreclosure rates in the country: Jacksonville, Orlando, Tampa Bay, and Daytona Beach.

According to data presented by RealtyTrac, the overwhelming majority of distressed homes across the country are either up for auction, or will be at some point in the near future. In fact, 47.3% of the nation’s distressed homes (according to RealtyTrac) have already been repossessed by their loan originators and are expected to be sold at auction. The remaining distressed homes are split between pre-foreclosures and bank-owned homes, 31.0% and 21.7% respectively.

U.S. Housing Market Projections

Forecasting the U.S. real estate market without an inherent degree of error is a fool’s errand. There is no crystal ball that can predict U.S. real estate market trends. However, it is entirely possible to read into trends and extrapolate data to make an educated guess. That said, it’s pretty safe to assume the following U.S. housing market projections will come true in the near future:

  • Prices Will Continue To Rise: The median home value in the United States has risen for seven consecutive years. Today’s median home value is approximately $80,000 higher than where it was at the depths of the recession in 2012. There’s nothing to suggest the trend won’t continue, too. While the national rate of appreciation is expected to temper slightly, home values will continue to increase, to the tune of about 2.2% over the next 12 months. Homes will become slightly more affordable relative to the previous year’s rate of appreciation, but limited inventory levels will continue to drive up prices, albeit at a tempered rate.

  • The Next Generation Will Join Millennial Buyers: Millennials have solidified themselves as the most active homebuyers in recent history. However, the tempering of appreciation rates should increase the number of first-time homebuyers who can actually afford to participate in the market; that means a great deal of buyers from Generation Z may be ready to participate in the market. The market has already seen an influx of buyers from Generation Z, but the rest of 2019 should see even more trying to take advantage of today’s great interest rates. According to a TransUnion report, the number of Generation Z consumers with a mortgage rose by 112% from the second quarter of last year to the second quarter of this year.

  • Interest Rates Will Remain Relatively Low: As the economy continues to demonstrate that it is capable of improving even further, the Fed feels compelled to increase interest rates accordingly. In fact, interest rates have been rising slightly for a couple of years now; that is, until the end of last year. Despite already being relatively low, interest rates started dropping (yet again) in December 2018, and now sit at a very attractive 3.77%.

  • Secondary Cities Will See An Influx Of First-Time Buyers: Today’s median home value has surpassed pre-recession peaks, and is now higher than it has ever been in the last seven years. Primary cities, as a result, may be out of the price range of today’s largest buyer pool: Millennials. Therefore, it’s safe to assume many first-time buyers will elect to forego the high prices of many primary cities in exchange for the affordability of their nearby, slightly cheaper counterparts.

Again, there is absolutely no guarantee these predictions will come true, but today’s real estate investors who can interpret trends correctly may be able to position themselves for success in the coming months.

Summary

The U.S. real estate market is better off today than it has been in recent history. While fears of a recession are on the minds of many, it’s important to remember that there are several fundamental differences between now and a decade ago. Lending practices and underwriting strategies, in particular, are a lot stricter, as to prevent a repeat of past transgressions. Despite the improvements, however, the American real estate market boasts countless opportunities for real estate entrepreneurs looking to make a career out of investing. With the right systems in place, there’s absolutely no reason anyone shouldn’t be able to realize success as an investor in the U.S. housing market.

Have you thought about investing in the U.S. real estate market? If so, what are you waiting for? We would love to know your thoughts on the current state of the American real estate market.

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either expressed or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.