Think U.S. cities real estate 2020 outlook
In 2020, the U.S. economy will enter its 11th year of expansion, the longest expansion since 1854. The U.S. economy grew at average annualized rate of 2.4% during three quarters of 2019. We expect U.S. economic growth to slow to around 2.0%-2.3% in 2019 as the fiscal stimulus effect fades and as trade weighs on growth.1 While we are not expecting a recession in 2020, the New York Federal Reserve predicts a 34.8% chance of a recession within the next 12 months.2
Due to slowing economic growth, the Federal Reserve Open Market (FOMC) cut the federal funds rates for the third consecutive time during the October 2019 meeting. The federal funds rate currently stands at 1.5%-1.75%. It is likely the FOMC will hold rates steady for the remainder of 2019 and into 2020, supporting economic growth.
In our view, the key risks to U.S. economic growth and, by extension the U.S. real estate market, are the U.S-China trade war, Brexit and slowing global economic growth. Slowing global growth has caused central banks around the world to cut their short term rates. Further, the probability of negative U.S. interest rates has risen in recent months as market participants worry about slower growth and potentially ineffective monetary policy should the U.S. economy enter a downturn.
1 U.S. Bureau of Economic Analysis
2 CME FedWatch Tool, November 2019