Fannie Mae Experts Predict Higher Home Prices

Experts predict home price growth will slow after reaching 5.2% this year, with 3.8% growth expected in 2025 and 3.6% in 2026, according to the Q4 2024 Fannie Mae Home Price Expectations Survey. While most panelists attribute the slowdown to high mortgage rates, increased housing supply, and slower wage growth, a smaller group expects stronger price appreciation due to pent-up demand and easing rates. Mortgage rates are forecasted to decline modestly, ending 2025 at about 6.3%, and new home sales are expected to increase while existing home sales remain weak.

Despite affordability challenges, panelists project home prices will continue rising through 2029, outpacing inflation. Similar forecasts from Bright MLS and Redfin suggest steady price growth and elevated mortgage rates next year. Fannie Mae’s senior economist, Mark Palim, emphasized that affordability will remain a barrier for many buyers. At the same time, Pulsenomics founder Terry Loeb noted that long-term home value increases signal persistent affordability issues.

Will Housing Return to Historic Norms Next Year?

Zillow forecasts that mortgage rates will fluctuate but trend lower in 2025, leading to modest growth in home sales and prices. Home sales are expected to rise slightly to 4.16 million units, and home values are predicted to increase by 2.2%, slightly below this year’s rate. Market trends are moving closer to pre-pandemic norms, with inventory levels improving but still below 2018-2019 averages. Homebuyers might find better deals during winter months due to reduced competition, as recent data shows declining competition in many metro areas and fewer homes selling above the list price.

The typical U.S. home value in November was $358,768, with a monthly mortgage payment of $1,865, down from last year but still over 100% higher than pre-pandemic levels. Among major metro areas, San Jose saw the highest annual home value increase at 7.5%, while Austin experienced the most significant drop at 3.4%. Home values rose annually in 42 of the 50 largest metro areas, with notable gains in New York and Providence, while seven metros, including San Antonio and Tampa, reported declines.

MBA: November New Home Mortgage Applications Rise 7.2%

The Mortgage Bankers Association (MBA) reported a 7.2% annual increase in mortgage applications for new home purchases in November 2024, despite a 12% decline from October. This aligns with typical seasonal trends. First-time buyers made up a significant share of demand, as 28% of applications were FHA loans. The seasonally adjusted annual pace of new home sales was estimated at 713,000 units in November, the third strongest month of the year, reflecting ongoing interest in new homes due to affordability challenges and limited existing inventory.

On an unadjusted basis, November saw 49,000 new home sales, a 12.5% drop from October’s 56,000. Conventional loans accounted for 61.6% of applications, FHA loans 28%, VA loans 9.9%, and RHS/USDA loans 0.4%. The average loan size decreased slightly from $409,942 in October to $402,873 in November, reflecting slight shifts in affordability and market activity.