Four Tailwinds for Housing

Last Week in Review: Goldilocks 2.0

As we enter the final weeks of 2019, the housing and home lending sectors have enjoyed a good year thanks to a “Goldilocks” scenario of a tight labor market, rising wages, consumer confidence, and three-year low interest rates.

Many are asking “What should we expect for housing, and thus lending, as we enter 2020?” The answer: 2020 may even be better for both.

Tailwinds for Housing in 2020 include:

        1. Housing starts of single-family homes are expected to hit the 1M mark for the first time in 12 years. This should help add to much-needed inventory in many parts of the country.
        2. In the final Jobs Report for 2019, which was November, the unemployment rate ticked down to 3.5%, a 50+-year low, while we created a massive 266,000 new jobs. Jobs buy homes, not rates. This kind of labor market strength heading into 2020 should further boost the housing sector.
        3. The Fed is not likely going to cut or hike rates in 2020, unless new economic threats emerge – meaning short-term interest rates are not likely to move much, if at all.
        4. Inflation remains low. Inflation is the main driver of long-term rates like mortgage rates. In the absence of any unforeseen pickup in inflation, home loan rates should remain relatively close to current levels for the foreseeable future.

Bottom line: 2019 was a good year and the data suggests the good times should continue well into the spring of 2020 making it a historic opportunity to have both a strong economy and low rates.