Home prices are expected to decelerate through the remainder of this year and beyond, according to the most recent economic projections.
Fannie Mae’s forecast for home price growth in 2024 is up from its second quarter projection of 4.3% to 4.7%, according to the government-sponsored enterprise's Q3 2024 Home Price Expectations Survey (HPES), produced in partnership with Pulsenomics, LLC. This is down from a 6% home price increase in 2023. Fannie Mae also lowered its 2025 projection, from 3.2% to 3.1%.
“Recent measures of home price growth, including our own, have continued to come in stronger than previously expected, as reflected by the 100-plus HPES panelists who, on average, once again modestly upgraded their home price outlook for 2024,” Fannie Mae Vice President and Deputy Chief Economist Mark Palim said. “Strong home price appreciation has persisted despite purchase affordability remaining stretched for the vast majority of consumers, a dynamic that is still primarily a function of inadequate supply.”
The ESR Group’s panelists overwhelmingly agreed on the fact that the U.S. is experiencing a shortfall of 2.8 million homes relative to underlying demographic factors, down from the previous estimate of 4 million.
“Despite robust home value growth in the first half of 2024, our panelists anticipate a slowdown in price appreciation for the remainder of the year and beyond,” said Terry Loebs, founder of Pulsenomics, the independent research firm that surveyed mortgage experts for this study.
Panelists were also surveyed on the potential impact of zoning and permitting reforms at state and local levels. While most agreed that reforms implemented to date are likely to have a positive effect on new construction within the next five years, 63% were “not confident at all” that the initiatives they consider to be the most effective will be enacted widely in five years time.
The initiatives deemed most likely to increase housing production included speeding up construction permitting processes, increasing density around transit corridors, and allowing more "missing middle'-type housing.
“While lower interest rates could incentivize some homeowners to sell,” Loebs added, “the deep-rooted housing supply and affordability crises will likely persist, even with a more accommodative monetary policy.”
