U.S. home prices will increase 2.4% in 2024 and 2.7% in 2025, a group of housing experts predict in a report from Fannie Mae.
According to the Q4 2023 Fannie Mae Home Price Expectations Survey (HPES), produced in partnership with Pulsenomics, home price growth will clock in at 5.9% in 2023, followed by slower growth in 2024 and 2025.
The report polls over 100 experts across the housing and mortgage industry and academia for forecasts of national home price percentage changes in each of the coming five calendar years, as measured by the Fannie Mae Home Price Index.
With mortgage rates having experienced significant volatility of late, this quarter’s HPES also asked panelists about their long-run interest rate expectations, as well as their opinions on potential drivers of mortgage rates in the future.
The average respondent expects the 30-year fixed rate mortgage rate to eventually settle to an average of approximately 5.7%.
“The survey panelists expect home price growth to decelerate in the coming years, following 2023 price growth that proved more resilient than many anticipated,” says Doug Duncan, senior vice president and chief economist for Fannie Mae, in the report. “Some, including us, had expected the rapid and significant rise in mortgage rates in 2023 to have dampened purchase demand further than it has, putting more downward pressure on home prices this past year than what appears to have occurred.
“Looking beyond the recent volatility in mortgage rates, panelists expect future rates to decline meaningfully from the recent highs of 8 percent,” Duncan says. “This would obviously provide improved affordability for potential homebuyers, although anyone expecting the return of the extremely low rate environment from 2020 to 2022 will likely be disappointed. The panelists also revealed that they anticipate other factors will impact long-term interest rates, including demographic trends, expanding fiscal deficits, the evolution of artificial intelligence, and the green energy transition.”
“Panel-wide, the average expected home price growth rate for 2023 jumped to 5.9 percent, which is a significant increase from the 3.3 percent level recorded in the previous survey conducted by Pulsenomics,” adds Terry Loebs, founder of Pulsenomics. “However, a large majority of the surveyed experts do not foresee this momentum carrying over into 2024—an encouraging consensus for aspiring homebuyers as we approach the new year.”
Photo: Nicole Avagliano