Don’t expect much relief in mortgage rates, which may stay above 6% in 2025
- December 06, 2024
A panel of 100 experts are forecasting that, after home price growth reaches 5.2% this year, it will slow to 3.8% in 2025 and 3.6% in 2026, according to the Q4 2024 Fannie Mae Home Price Expectations Survey (HPES), produced in partnership with Pulsenomics, LLC.
The panel’s latest estimates were actually up from the previous quarter’s predictions that growth would reach 4.7% this year, 3.1% in 2025 and 3.3% in 2026. The panel also predicts that existing home sales will remain slow next year, while new home sales will trend upward. Mortgage rates will remain elevated and decline modestly through the year to end at about 6.3%.
The main reasons for the sluggish home price growth include high mortgage rates, increasing number of homes on the market and slower wage growth going forward. A smaller, contrarian group of panelists expected to see faster home price appreciation because of the pent-up demand from first-time homebuyers, fewer homes on the market and the easing of mortgage rates.
“While home price growth is expected to ease next year, HPES panelists’ big-picture view for 2025 appears to be little changed compared to 2024, with most seeing another year of elevated mortgage rates and weak home sales,” said Mark Palim, Fannie Mae’s senior vice president and chief economist. “We share our panelists’ view that home price growth is likely to decelerate next year, as the mix of continued elevated mortgage rates and the run-up in home prices of the past four years will likely continue to strain affordability and remain an impediment to many would-be homebuyers.”
The forecasts of a majority of Fannie Mae’s panel align relatively well with other expert predictions for next year. The Bright MLS Housing Forecast, for instance, predicts that home prices will increase by 3.1% in 2025, and that mortgage rates will average 6.4% before ending the year at 6.25%.
Redfin’s economists expected slightly higher numbers, with home prices rising 4% in 2025 and mortgage rates to fluctuate through the year before ending up averaging about 6.8%.
Despite ongoing housing affordability issues, Fannie Mae’s panelists expected annual average home prices to continue climbing through at least 2029.
“Although a significant majority of experts expect the nationwide home value appreciation rate will diminish from recent levels, the panelists’ annual average projected price increase through 2029 is still well above expectations for economy-wide inflation, suggesting that they expect affordability problems to persist well beyond 2025,” said Pulsenomics founder Terry Loeb.
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