2019 was another strong year for the Bozeman real estate market. Home prices continued to rise and development boomed (especially downtown). There was still a lot of construction happening with new subdivisions in Bozeman, and the surrounding areas saw a surge of growth. With talk of another recession and an upcoming election year, many are wondering what the real estate market will look like in 2020. Nationally and locally 2019 had historically low mortgage rates, home price increases, low inventory, and affordable housing problems. Most economists and real estate experts do not expect to see much change in the housing market in the coming year. Here are five real estate predictions for 2020.
While some National Association of Realtor economists think rates could jump initially in 2020, the majority believe they will remain stable*. That, along with a healthy economy will continue to boost buying power keeping the real estate market strong. Even with our healthy economy, 60% of economists think a recession is possible in 2020, but the likelihood of it causing another housing market crash is low. (Fortune)
Similar to the past few years, 2020 is expected to have a lot of demand amongst first-time homebuyers without enough supply of homes to buy. This will lead to competitive offers that will continue to raise home prices. Some economists think this imbalance could push the annual home appreciation up as high as 6-7%, however, most agree it is more likely to be in the 3-4% range.*
With any election cycle, spending tends to slow down as people wait to see what will happen, but it is usually minimal. If there is a slow down in the real estate market due to the election in 2020, it will most likely be temporary. Locally in Bozeman, we are seeing changes within our city government. With the city manager recently quitting and the firing of the affordable housing manager, there is an opportunity to look at what is and isn’t working and hope for some positive change to come.
We are seeing a change in this trend as home sizes have begun to shrink for the first time and this is expected to continue.* Condos, townhomes and smaller homes are becoming more desirable because there is less maintenance and upkeep. A large number of millennials will be turning 30 during the year 2020 which is a peak home-buying age for this generation and most will be looking to condos and townhomes as their first purchase, both because of affordability and the low maintenance. It also a time when baby boomers are making their way out of homeownership or downsizing.
Much like the real estate market across the country, Bozeman will probably remain the same as it has the past few years in 2020. If there was a recession or decline in the real estate market, Bozeman would probably remain relatively unaffected as we continue to grow and be a place for second homes, retirees and people working remotely. Our biggest issue will continue to be affordability. Bozeman shows no sign of slowing down, people are moving to Bozeman for a lifestyle and they will make it work. This contributes to the imbalance of supply and demand and in turn, drives prices up. This is especially true at the lower prices because the demand is so high for these homes. With the middle to upper-priced homes, there is more inventory, however, they still tend to sell quickly. Some of this demand will be met in the surrounding areas such as Belgrade, Livingston, Three Forks, and Manhattan.
New developments are really taking off in these areas as Bozeman has few remaining lots to be built on and if a builder does have some they most likely aren’t building affordable housing. We will probably see the biggest changes in 2020 in the surrounding Bozeman areas. Affordable housing will stay at the top of Bozeman’s future planning as they begin to look at these problems more seriously. There are some big projects coming up including the Willow Springs Townhomes from HRDC, a potential affordable housing project behind Lowes, and the fourth phase of Allison Subdivision south of town which will include affordable townhomes. As Bozeman moves forward on making affordable housing a priority, more developers are following suit.
Overall the general consensus from national economists and local agents is the real estate market will remain stable for 2020. The economy is good, the job market is strong, mortgage rates are low and the market is relatively balanced. In 2020 buyers can take advantage of low rates and sellers can take advantage of low inventory.
We recently sat down with Andrew Hurlburt, owner of Bozeman Real Estate Group, to talk about what Bozeman's real estate market will look like in the upcoming year. We discuss how a future recession would impact Bozeman's housing market, whether Bozeman has enough resources to continue to grow at this rate, and how we expect to see Bozeman's surrounding areas change in the next several years. Click here to listen.
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