We are happy and proud that so many First Community Mortgage customers have either become homeowners or have saved money on their monthly payments with our help. And we pride ourselves at helping clients even after the loan funds, either through accepting referrals, answering servicing questions, or continuing to educate them about market conditions. With that in mind, we answer the question: Why are house prices going up in 2020? There are three basic reasons.

The first reason is the demand for housing. Few don’t want to own their own home, regardless of age. Millennials (those born between 1981 and 1996) are the key buyer group, representing about 40% of all home sales. There’s still more potential in this group, however, given that the homeownership rate for those under 35 years old is roughly 40% compared with 64% for adults aged 35 to 44 years old. As younger folks marry and start families, the demand for homes will continue to grow, and we have some great first-time home buyer programs.

FCM is always helping Gen Xers (those born between 1960 and 1980) and Baby Boomers (1940 to 1960) who are facing life stage and lifestyle changes related to COVID-19, retirement, and age that also bode well for future housing demand.

The second key reason for the increase is because the very low mortgage rates. With rates so low at FCM, many consumers are enjoying the affordability of a mortgage. Our 30-year fixed rates have remained near or below 3% for some months now. Unfortunately, this is due to the hard times that the economy is experiencing due to the pandemic. The Federal Reserve have expressed the desire to keep the federal funds rate near zero through 2023. The federal funds rate is not equal to mortgage rates because of credit risk, but they do move in tandem. This continues to be a boost for the market.

As builders serving in our communities see high demand, many have raised the price of newly constructed homes. Lower mortgage rates help offset home price growth for now, but that may not last forever.

Lastly, people are using their home like never before. It’s not uncommon for families who now use their homes as their office, gym, school, bar, and restaurant! And for many, a one or two-bedroom home is not enough. Many of our clients have moved to the suburbs, a trend that is expected to continue as buyers continue looking for homes that meet their evolving needs.

In addition to demographics, low mortgage rates, and an increased reliance on our homes, the increase in prices is also helped by a decent stock market and healthy home equity are among the other positives fueling demand. There’s no shortage of economic risks today, however, including a slowing or backsliding economy with accompanying job losses, a continued delay in getting more stimulus passed, or the impact of winter on COVID-19 cases and business profitability.

On a global scale, however, these demographics are not going away and will drive the housing market for the next 10 years, and First Community Mortgage is here to help you.