WASHINGTON, DC – Home price growth in the second quarter surpassed expectations but is projected to slow down, ending 2024 and 2025 with annual growth rates of 6.1 percent and 3.0 percent, respectively. This forecast comes from the July 2024 commentary by the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. Despite a significant rise of over 30 percent in home listings compared to last year, housing activity indicators remain weak, demonstrated by fewer existing home sales in May compared to the previous year. The combination of increasing supply and demand limited by affordability is expected to moderate home prices, which rose 3 percent on a non-seasonally adjusted basis in the second quarter, according to the Fannie Mae Home Price Index. The ESR Group also highlighted recent regional fluctuations in listings and home prices, noting that inventory levels in many large Sunbelt metros now match or exceed those of 2019. Consequently, the ESR Group revised downward its forecasts for housing starts and new home sales, while slightly increasing its existing home sales forecast due to a modestly lower projected mortgage rate path.
The ESR Group made minor adjustments to its economic growth outlook, as recent data aligned with expectations for a slowdown. Notably, following two consecutive lower-than-expected Consumer Price Index (CPI) reports, the ESR Group lowered its inflation forecasts, now predicting the CPI to close the year at 2.9 percent and the core Personal Consumption Expenditures (PCE) Index at 2.5 percent. In light of improved inflation data and signs of a slowing labor market, the ESR Group now expects the Federal Reserve to cut rates in both September and December.
“The housing market is still awaiting improved affordability, even as the supply of new and existing homes for sale gradually increases,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “The recent slight decrease in mortgage rates, following data indicating slowing economic growth, hasn’t been sufficient to overcome significant affordability constraints faced by potential homebuyers. As a result, despite more homes being listed, actual home sales haven’t increased. We continue to expect national home price growth to slow – but remain positive – in the near term. However, conditions can vary by region, especially concerning supply. For instance, many Sunbelt metros are experiencing significant inventory increases due to new construction, while the Northeast and Midwest still have very tight supply. Overall, we anticipate these varied market conditions to result in a slight decline in total new home sales nationally for 2024, but a slight increase in existing home sales.”
For more information, read the original press release from: https://www.fanniemae.com/newsroom/fannie-mae-news/home-price-growth-expected-moderate-listings-outpace-sales