Rate Of Home Price Growth Expected To Moderate, According To Expert Panel

Home Price Growth Forecasts

Following a robust home price growth of 6.6% in 2023, a panel of housing experts forecasts a slight deceleration in annual national home price growth to 4.3% in 2024 and 3.2% in 2025. These projections come from the Q2 2024 Fannie Mae (FNMA) Home Price Expectations Survey (HPES), produced in partnership with Pulsenomics, LLC. The HPES gathers insights from over 100 experts across the housing industry, mortgage industry, and academia to predict national home price percentage changes over the next five years, measured by the Fannie Mae Home Price Index (FNM-HPI).

Rising Projections and Mortgage Rate Trends

The panel's latest estimates of national home price growth are higher than last quarter's expectations of 3.8% for 2024, though slightly lower than the previous quarter's 3.4% forecast for 2025. Additionally, the panel projects the 30-year fixed mortgage rate to close 2024 at 6.6%, a significant increase from the prior quarter's forecast of 5.9%. This rise in mortgage rate expectations, coupled with continued above-trend home price growth, continues to strain home purchase affordability.

A key insight from the survey is the changing sensitivity of homebuyers and sellers to the "lock-in effect" despite generally rising mortgage rates. According to the survey, 84% of respondents believe that sensitivity to the lock-in effect is diminishing, contributing to the increase in for-sale home listings. The majority of experts anticipate that any loosening of this effect will result in either "somewhat" or "significant" deceleration in home price growth.

Expert Insights on Market Trends and Affordability

"The rise in mortgage rates in 2024 and above-trend home price growth continue to strain home purchase affordability," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. He added, "Listings have trended generally upward of late, suggesting to us that a rising number of current homeowners can no longer put off moving. However, we believe the ongoing affordability challenges are likely to weigh on how quickly these new listings convert to actual sales. On average, the expert panelists expect only a modest decline in mortgage rates through the rest of the year, and a majority also see the 'lock-in effect' weakening, which would likely lead to a gradual uptick in for-sale listings and continued moderation of home price growth over the forecast horizon."

Terry Loebs, founder of Pulsenomics, shared a hopeful perspective: "A slowdown in home price growth and easing mortgage rates offer a glimmer of hope that the peak of the housing affordability crisis may be behind us. However, the price surge of over 50% nationwide since early 2020 has created a high hurdle that will, unfortunately, keep many aspiring homeowners on a slower path to achieving their dream."

Future Outlook for the Housing Market

As we move forward, the insights from the Q2 2024 HPES provide a nuanced understanding of the current housing market landscape. The expected moderation in home price growth and the potential easing of mortgage rates could alleviate some of the pressures on homebuyers. However, the significant price increases that we’ve seen over the last five years pose ongoing challenges for those seeking to enter the market.

(Source: prnewswire.com)

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