What will happen to home values in 2020?
Will the Greater Bay Area become more or less affordable?
Will interest rates go up?
We’ll answer these questions and more in the coming weeks, so stay tuned!
The 2019 Economy and Housing Market in Review
In 2019, the national economy grew at a steady, healthy pace. Employment remained near all-time lows, and gross domestic product (GDP), a measure of all goods and services produced during the year, grew by more than 2%. In spite of some potentially negative economic events, such as the trade war with China, the U.S. economy remained strong. The wage growth from October 2018 to October 2019 tied with the growth from April 2008 to April 2009 for the largest year-over-year increase in the past decade. The country also added 312,000 jobs in December, nearly doubling November’s job growth of 176,000.
[INSERT REALTOR SUMMARIZATION – HOW DOES THIS CORRELATE WITH EITHER BEING A GOOD TIME TO BUY OR GOOD TIME TO SELL?]
The Federal Reserve surprised a lot of folks by reducing the federal funds rate three times in 2019 in order to maintain a thriving economy. The federal funds rate, which indirectly impacts a variety of consumer interest rates including credit cards and car loans, significantly affected mortgage rates in 2019.
After rising in 2018, last year’s mortgage rates returned to historic lows. Lower rates typically improve housing across all markets by giving home buyers access to cheaper financing.
In May 2019, home prices in the Greater Bay Area hit their yearly peak. While this trend is typical for the spring months, it was accelerated by falling rates. The chart below shows interest rates decreasing and home prices increasing.
[INSERT REALTOR SUMMARIZATION – IN A NUTSHELL, WHAT DOES THIS MEAN FOR BUYERS OR SELLERS?]
In the latter half of the year, home prices pulled back from their spring highs while interest rates fell even lower, increasing affordability. In California, mortgage payments fell by 7.4%, the largest decline in the last five years. This drop more than offset the 10.3% increase in median home prices, and mortgage payments declined for nine consecutive months.
Stay tuned for Part Two next week!