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Generally speaking, 2020 is expected to be a tepid year for the U.S. housing market. Existing home sales are expected to drop by 1.8% on average, according to Realtor.com, thanks to an uptick in new construction and a lack of affordable inventory in many markets.
Home prices are expected to continue to rise, with the average U.S. home value forecast to grow by 0.8% over the next year. However, this is much lower than the gains we've seen in recent years. Over the past five years, the average U.S. home has seen its value grow by more than 25%, so it's fair to say that a gain of less than 1% in 2020 would be a significant slowdown.
Having said that, it's important to realize that any statistics having to do with the U.S. housing market are big generalizations. There are some markets that are expected to thrive in 2020 -- for example, sales volume is expected to grow by 5.5% in my hometown of Columbia, South Carolina, and prices are expected to rise by more than 8% in Boise, Idaho.
On the other hand, there are some markets that experts expect to be far weaker than the U.S. average in 2020. According to Realtor.com's 2020 Housing Market Predictions, which analyzed the 100 largest real estate markets in the United States, here's where we can expect sales volume and home prices to fall the most.
Markets where sales are expected to decline
As I mentioned, sales volume is expected to fall in 2020 when it comes to existing homes, with the average U.S. market forecast to see a 1.8% year-over-year decline. However, there are some markets that are expected to experience declines that are much larger:
| Market | 2020 Sales Volume Change |
|---|---|
| Des Moines, Iowa | -10.5% |
| Palm Bay-Melbourne-Titusville, FL | -9.8% |
| Las Vegas-Henderson-Paradise, NV | -9.5% |
| Richmond, VA | -7.7% |
| Riverside-San Bernardino-Ontario, CA | -7.6% |
Data source: Realtor.com
One key takeaway is that 2020 is expected to be a particularly weak year for those real estate markets that have been the hottest in recent years. This isn't necessarily the case in all of the markets on this list, but places like Las Vegas, South Florida, and Riverside are certainly in this category.
Furthermore, supply problems are expected to get worse, especially in big cities. In addition to the cities on this list, notably hot real estate markets like New York City and San Francisco are also expected to experience above-average sales volume declines.
Markets with falling home values
While the markets in the previous chart are expected to see the largest sales volume declines in the U.S., it's important to mention that sales volume and price aren't strongly correlated. In fact, in all but one (Las Vegas) of the markets with the largest projected sales declines, prices are expected to rise in 2020.
This certainly makes sense if the sales declines are caused (at least in part) by a supply problem. After all, when there isn't enough supply to meet demand, it generally results in rising prices. However, there are some markets that are expected to see home prices fall in 2020. The five markets with the worst expected price drops are:
| Market | Expected 2020 Average Home Price Change |
|---|---|
| Kansas City, MO | -4.0% |
| Scranton-Wilkes-Barre-Hazleton, PA | -3.2% |
| Greensboro-High Point, NC | -2.9% |
| New Haven-Milford, CT | -2.4% |
| Tulsa, OK | -2.3% |
Data source: Realtor.com
Take these with a grain of salt
With all of this in mind, it's important to realize that these are just projections. Not even the best industry experts have a crystal ball or some other way to know with 100% accuracy what is going to happen. In 2019, for example, the actual U.S. home price increases were nearly double the 2.2% gain that Realtor.com had projected. So while these projections are certainly made with the best information available, it's important to realize that the actual 2020 results are likely to be somewhat different.
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