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:
- 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.
- 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.
- 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.
- 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.