Home price growth is forecast to enter a period of deceleration over the next two years, according to experts at Fannie Mae who released a revised outlook on the market this week in their Home Price Expectations Survey (HPES).
The slowdown to 3.8% in average home price growth in 2025, and 3.6% in 2026, is a marked drop from this year’s strong, expected average national home price growth of 5.2%, but an upward revision from last quarter’s forecast of 4.7% for 2024, 3.1% for 2025, and 3.3% for 2026.
“We share our panelists’ view that home price growth is likely to decelerate next year,” said Mark Palim, Fannie Mae senior vice president and chief economist, “as the mix of continued elevated mortgage rates and the run-up in home prices of the past four years will likely continue to strain affordability and remain an impediment to many would-be homebuyers.”
The majority of panelists (80%) contributing to the survey cited continued high mortgage rates, rising for-sale housing inventory, and slower wage growth as the main drivers.
Affordability strains are not limited to “would-be buyers,” though. High-income borrowers are feeling a credit crunch as delinquencies across the consumer-finance landscape rise. A growing number of distressed households may complicate qualifications for lenders heading into 2025.
Mortgage seller-servicers told NMP they are closely watching these broad consumer metrics.
The slowdown indicated in Fannie Mae’s survey, produced in partnership with Pulsenomics, was mirrored in a recent CoreLogic analysis also forecasting home price gains as entering a period of slower — albeit historically average — growth.
Slow growth is still growth, however, and analysts from CoreLogic remain optimistic about a home-price peak being reached in April 2025.
“The panelists’ annual average projected price increase through 2029 is still well above expectations for economy-wide inflation, suggesting that they expect affordability problems to persist well beyond 2025,” said Terry Loebs, founder of Pulsenomics, on the recent projections.
