Forecast: Hottest 2020 Housing Markets in South; California to See Cooldown
Last week, we brought you a story about which U.S. housing markets changed the most over the past decade (https://newslink.mba.org/mba-newslinks/2020/january/housing-markets-that-changed-most-over-past-10-years/). Today, we present predictions for 2020’s hottest housing markets, courtesy of Zillow, Seattle.
The Home Price Expectations Survey, sponsored by Zillow and conducted quarterly by Pulsenomics LLC, asked more than 100 economists, investment strategists and real estate experts for their predictions about the U.S. housing market. The Q4 survey also asked panelists to rate their 2020 expectations for home value growth compared to the nation in 25 large markets.
On average, panelists said they expected U.S. home values to grow by 2.8% in 2020. They also said the southern half of the U.S., led by Austin, Texas, would perform the best in 2020.
Austin is the most likely to see home value growth above that expected average this year according to the panelists, earning a score of 76. A whopping 83% of respondents said they expect the Austin market to outperform the U.S., with only 7% saying it will underperform. Southern markets Charlotte, Atlanta and Nashville were standouts as well, with scores of 59, 51 and 49, respectively. Charlotte was the only market among the 25 analyzed in which none of the panelists said it would underperform.
Of the 14 markets with positive scores, 11 come from Texas or elsewhere in the Southeast or Southwest. The exceptions are Denver, Minneapolis and Portland. Seattle was the most polarizing market, with an even 40% of panelists each expecting it to overperform and underperform.
Of the 10 markets that earned negative scores, six were in California. A group of expensive markets in the state — San Francisco, San Jose and Los Angeles–are expected to perform the worst. Cincinnati and Sacramento round out the bottom five.
Zillow isn’t the only skeptic about California. Jeff Lazerson, a mortgage broker and columnist with the Orange County Register, says California will be “especially vulnerable to a regional home price collapse because of the state’s extraordinary price gains as well as high state and local taxes. The median southern California price will be nearly $900,000 before all of this comes crashing down.” (https://www.ocregister.com/2020/01/02/prediction-home-values-will-drop-by-25-to-50-in-decade-ahead/).
Skylar Olsen, Zillow director of economic research, agreed. “Having subjected buyers to a crucible of fierce competition for multiple years, many West Coast markets hit an affordability ceiling that set off declining home values in the most expensive of these,” she said “Indeed, this price correction — a clap back from having appreciated with too much exuberance in the recent past — pushes many previously hot markets to the bottom of our experts’ list. At the top of the list are metros still providing relative affordability and thriving, amenity-rich communities that appeal to younger adults willing to make a move. These features, plus the ability to grow and add housing in the future, are attractive propositions for employers and employees alike.”
Panelists expect home values in San Jose and San Francisco to continue falling in 2020, and some expect more markets in California to join them. Sixteen panelists of the 42 that selected at least one metro said home values will fall in Los Angeles, and 12 said the same about San Diego and Riverside.