After decelerating for two previous quarters, home price growth re-accelerated on an annual basis in the fourth quarter, according to Fannie Mae.
U.S. home prices increased 1.7% compared with the third quarter and were up 5.8% compared with the fourth quarter of 2023, according to firm’s quarterly home price index.
Annual home price growth in the third quarter was 5.4%.
The report measures quarterly price change for single-family properties and excludes condos.
“Year-over-year home price growth accelerated in the fourth quarter, following back-to-back quarters of deceleration,” says Mark Palim, senior vice president and chief economist for Fannie Mae, in a statement. ”Inventories of existing homes for sale have improved from a year ago but remain historically low, due largely to the so-called ‘lock-in effect.’”
“Since the beginning of October, mortgage rates have rebounded after bottoming out around 6.1 percent and are now inching closer to a new psychological barrier, the 7 percent threshold,” Palim says. “The higher mortgage rate environment is not only hurting affordability, but it’s also exacerbating the lock-in effect by further reducing homeowners’ incentive to move.”
The only way to get things moving again, Palim says, is for mortgage rates to drop.
“The housing market in 2025 faces a difficult balancing act, with a notable decline in mortgage rates likely needed to help unwind the lock-in effect and thaw the supply of existing homes for sale,” he says. “However, we believe such a decline would likely jumpstart demand from potential first-time homebuyers currently waiting to purchase, which could lead demand to outpace any improvement in supply, further exacerbating already-high home prices and purchase affordability.”
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