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12/11/2019

NAR forecast says little chance of a recession in 2020

At the first-ever National Association of Realtors (NAR) Real Estate Forecast Summit, a group of top economists said that the chances of a recession hitting in 2020 are dwindling.

The economists who gathered at the summit at NAR headquarters in Washington, D.C. said they expect the U.S. economy to continue expanding next year while projecting real estate prices will rise and reiterated that a recession remains unlikely.

Economists also predicted a 29% probability of a recession in 2020 with forecasted Gross Domestic Product growth of 2% in 2020 and 1.9% in 2021.

The group also expects an annual unemployment rate of 3.7% next year with a small rise to 3.9% in 2021.

Regarding whether the Federal Open Market Committee will change the federal funds rate in 2020, 69% of the economists said they expect no change, while 31% expect the committee will lower the rate next year.

Average annual 30-year fixed mortgage rates of 3.8% and 4.0% are also expected for 2020 and 2021. Annual median home prices are forecasted to increase by 3.6% in 2020 and by 3.5% in 2021.

NAR Chief Economist Lawrence Yun.

“Real estate is on firm ground with little chance of price declines,” said NAR’s Chief Economist Lawrence Yun. “However, in order for the market to be healthier, more supply is needed to assure home prices as well as rents do not consistently outgrow income gains.”

Apartment rents are expected to rise 3.8% and 3.6%, respectively, in 2020 and 2021. According to the group of economists, annual commercial real estate prices will climb 3.6% in 2020 and 3.4% in 2021.

“Residential and commercial real estate investment remains attractive as we approach the start of a new decade,” said NAR President Vince Malta, a broker at Malta & Co., Inc., in San Francisco, Calif. “Increased home building can serve as a stimulator for the overall economy, and we strongly encourage more homes to be built as buyer demand remains strong.”

The 2019 NAR Real Estate Forecast Summit consensus forecasts are compiled as averages of the responses of 14 leading economists who participated during the summit. The survey was conducted from December 2-5.