Real Estate Market Forecast Next 5 Years

5 Year Forecast for the Housing Market

What does the market crystal ball indicate about the 5 year outlook on the residential real estate markets across the US?

There’s a number of factors in progress that will push prices up or down in the next 2 years, yet they may remain relatively flat for to 2030.  Yes, it’s possible more big stimulus could happen in the next 5 years, but the national debt and trade deficit are big problems that may prevent free spending.

There’s still lots of cash in bank accounts and corporate accounts, but the government is looking to drain them until inflation eases. That means buying houses will become less of an obsession for Americans.

It doesn’t look for new housing construction with unemployment rising combined with higher mortgage rates.  Demand is strong, but since home prices aren’t falling, unaffordability will chill the markets for years to come.

You can see the home prices forecast from Renofi for 2030 for selected major metros below.

The housing market forecast and stock market forecast both are tempered by continuous high interest rates.

The US FED and current government believe only higher interest rates applied persistently over years can lower inflation. Unfortunately, home prices haven’t reclined as hoped and demand persists.  And January’s renewed inflation means mortgage rates won’t be coming down soon.  The persistence of inflation will mark 2023/2024, but after that stagnation is likely.  The M2 money is destroying liquidity in markets and rising interest rates make investment in housing unlikely.

The most likely prediction of the housing market to 2028 is that it will improve somewhat. There’s little to support booming home prices other than growing immigration. Yet the 2024 elections will tell a lot about what pressure on housing demand will happen to 2028.

If new housing isn’t built, then selling a home doesn’t seem intelligent, and sellers have nowhere to go. Most won’t tolerate the uncertainty in the next 5 years. And since housing construction won’t catch up for at least 5 years, prices are going to stay elevanted.  NIMBY and local government anti-development regulations will ensure supply will lag.

Does Buying a Home Within 5 Years Make Sense?

The fact you can’t afford the lofty prices in your city might be your saving grace. And home prices likely won’t fall, unless some government action brings the house of cards tumbling down. That could happen.

As home prices surpass their peak levels, you might be wondering if buying is a good investment. Will the housing market crash and will the stock market crash? Either event might ruin your personal wealth. 2007 wasn’t fun.

A look at the 6 month housing forecast is wise, and looking forward with an open mind to the next 5 years is wiser. So where would you start investigating the long term outlook for the US housing market, when such information may not be available? Fortunately, I’ve done some of the research work for you.

There are many housing market experts and each has their own view on market directions. Some are a little too dour (they forecasted a 2018 housing crash which didn’t happen, and some are forecasting one soon) .

We need a continuous prediction of the market in years 2023, 2024, 2025 to 2028 that includes demand estimates and supply estimates. It really is a demand vs supply issue, funded by estimates of economic growth, employment, wages, savings, and more.

If you’re thinking a housing market correction couldn’t happen, consider that when the economy sours, many Realtors will advise their clients to sell, sell, sell. They’ll over do it, in order to look smart and prescient. The markets really are emotionally loaded. It won’t take much to start a cascade of selling to unload stock or housing, after they’ve reached the peak.

Once values stop appreciating, investors lose interest and buyers will then wait until they bottom out. This colors the 5 year housing market forecast — as fearful people bail out of investments with no future.

5 Year Housing Market Outlook

The President’s multi-trillion dollar stimulus packages have injected hundreds of billions into the economy.

That’s a huge injection of funds into housing and into American savings accounts. It’s money in stock markets and 401k’s too.  A large pool of money available when the recession eases and buyers won’t hesitate to big because demand is high and builders aren’t all that busy.

Real estate is a solid bet for at least 10 years.

Immigration and Gen Y and Gen Z housing demand will push home prices ever higher. And of course, funds will flow into the DOW, NASDAQ, S&P and Russell 2000 as businesses benefit from this economic recovery. GDP is growing fast right now and could reach 10% by the end of 2021.

The outlook for the housing market to 2026 is rosy, especially for sellers. Financing looks good and plentiful, housing construction will pick up, and there are endless buyers, especially for single detached homes.

Housing Market Trends to Watch

• unemployment moves up a little
• GDP rises in 2023
• interest rates will rise only slightly
• builders will get some support for building
• lending criteria for banks will stay tight
• work from home will remain a major trend but others will head back to the offices
• government spending will drop over the next 5 years
• M2 money supply is shrinking fast constraining liquidity for real estate purchases
• taxes on big corporations are rising thus will reduce competitiveness
• supplies of steel, copper, lumber, plastics will rise as supplies remain slack
• the number of home renters will grow strongly (home ownership too expensive)
• inflation will remain around 4% for 2023
• mortgage defaults will grow but not be out of control (higher interest rates)
• home prices will continue rising through 2023 as economy improves
• listings and inventory will grow slightly from this point forward
• friction with China will grow and tariffs will grow against China imports
• global GDP will grow and international trade will increase
• personal income and wealth will stay level

Which US States Will Surge?

As this chart below shows, Texas is in for dramatic growth for many years. Its zero income tax, energy wealth, growing IT industry, and agricultural production will make it the top US state. Tennessee, North Carolina, Utah, Iowa will grow with Florida moderate, while California, Washington, New York and other high cost states will flat line.

Other states in the heartland will grow due to the low cost of living and low house prices in those states. Sellers want to sell their homes in cities and move to safer, quieter communities where they can work online.

Key Statistics in Charts:

Economic growth outlooks for the next 5 years, primarily because of strong latent demand, demographics, and continuous infrastructure stimulus spending. The forecast is for a

Home Price 5 Year Outlook

In a controversial report, CoreLogic predicts home prices will only grow 3.3% to 2022. NAR has recently predicted 5.7% by year end. Yet prices have risen strongly this winter and spring. The pandemic is ending (buyers will return to the market) housing construction has been slowed, buyer employment and wages will rise, many will feel a home is still the best investment, and euphoria is a very likely mood in both the stock market and housing market.

A more likely scenario is the 10% growth this year, followed by slower levels through to 2026. As mortgage rates rise, the housing market will be highly impacted.

Millennial aged buyers are a big part of the story. 38% of home sales went to millennials in 2020. There’s so many of them getting married or just buying a house now, that this is going to power up the market for many years. As home construction picks up in the next 5 years, they will finally be able to buy one, albeit at a higher mortgage rate.  If you can’t buy a home, you may want to invest in builder stocks as the builders will thrive in the next 5 years.

Average Home Prices in Ten Years

By 2030, home prices will have risen substantially, and no one expects the price of real estate will decline. Land is a precious commodity. We will see digital technology make remote work more common. Living in the cities won’t be necessary, but most home buyers don’t buy far from where they and their families live. And that is what pushes prices higher in the cities.

Mortgage Rate Outlook

Interest rates are expected to fall in 2023 and should be back at low numbers by end of 2024. As the economy is suffocated, it will need some relief. No one is forecasting mortgage rates however the CBO is projecting persistent interest rates in the neighborhood of 3% to 2030.

Housing Construction 5 Year Forecast

Statista isn’t quite as optimistic about housing construction.  As the Census.gov report shows, it’s all downhill right now, yet falling rates in 2024 should ease the construction losses.  Yet demand will persist and there is some political pressure to ease the housing shortage.  When rates are eased, we’d expect construction numbers to rise.

Review the current housing market forecast for more details on sales happening right now.

 

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