
Home Price Growth Surges In Q4 2024

Fannie Mae's Chief Economist expects a difficult balancing act for the 2025 market
Home price growth is once again picking up the pace after facing back-to-back quarters of deceleration, according to Fannie Mae’s Home Price Index (HPI). Fannie Mae’s HPI measures quarterly price change for all single-family properties in the United States, excluding condos.
Single family home prices shot up 5.8% year-over-year in the fourth quarter (Q4) of 2024, accelerating from the previous quarter's downwardly revised 5.4% annual growth rate.
On a quarterly basis, home prices rose a seasonally adjusted 1.7% in Q4 2024, up from the downwardly revised 1.2% growth rate in Q3 2024. On a non-seasonally adjusted basis, however, home prices increased just 0.3% in Q4 2024.
Fannie Mae Senior Vice President and Chief Economist Mark Palim credits the sudden acceleration in annual home price growth in Q4 2024 to rising mortgage rates in the latter half of the year.
"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,’”said Palim. “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 expects the 2025 housing market will be "a difficult balancing act," since a significant decline in mortgage rates is likely needed to help unwind the lock-in effect and thaw the supply of existing homes for sale. However, Palim also believes that such a decline in rates would jumpstart demand from potential first-time homebuyers who are currently waiting to purchase.
That could, in turn, lead demand to outpace any improvement in supply, further exacerbating these elevated home prices and affordability challenges.
“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,” Palim said.