Home Price Growth Expected to Slow Down, Mixed Trends Across Regions
WASHINGTON, Jan. 22, 2025 /PRNewswire/ — A recent rise in the 10-year Treasury yield has increased mortgage rates, which is likely to continue impacting existing home sales. These sales may remain at their lowest levels since 1995, as reported by the January 2025 commentary from Fannie Mae’sFNMA Economic and Strategic Research (ESR) Group. The ESR Group now predicts that mortgage rates will end 2025 and 2026 at 6.5% and 6.3% respectively, adjusted from earlier expectations of 6.2% and 6.0%. Additionally, anticipated home price growth is set to decrease to 3.5% in 2025, down from 5.8% in 2024. Home price appreciation will likely differ significantly by location, influenced by local construction activities and the availability of homes for sale.
The ESR Group acknowledges that recent economic data indicates a strong finish for 2024, especially within the labor market. However, their outlook for economic growth remains largely unchanged, projecting continued but slowing growth in real GDP for 2025 at 2.2%, compared to a forecasted 2.5% growth for 2024.
“Despite signs of resilience in the labor market, higher mortgage rates linked to a growing economy will likely persist in posing affordability challenges for many potential homebuyers,” explained Mark Palim, Fannie Mae’s Senior Vice President and Chief Economist. He added that due to ongoing affordability constraints, another year of sluggish existing home sales is expected. However, a positive note for buyers is that anticipated income growth may outpace both home price and rent increases this year. In many markets, new homes are also becoming competitively priced with existing homes and are more readily available. Overall, the combination of limited home sales activity and high mortgage rates suggests that the national housing market in 2025 will resemble that of 2024.
For more details, visit the Economic and Strategic Research site at fanniemae.com to read the full January 2025 Economic Outlook, covering the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To get email updates about housing market research from Fannie Mae’s Economic and Strategic Research Group, please click here.
Views and analyses from Fannie Mae’s Economic and Strategic Research (ESR) Group in these materials are not indicative of Fannie Mae’s business prospects or expected results. These insights are based on several assumptions and may change without notice. The impact on Fannie Mae will depend on various factors. Although the ESR Group relies on information it deems reliable, it cannot guarantee accuracy, currency, or suitability for any specific purpose. Changes in underlying assumptions may lead to significantly different outcomes. The analyses, opinions, and forecasts published by the ESR Group represent its views as of the date indicated, not necessarily reflecting the views of Fannie Mae or its management.
About the ESR Group
Fannie Mae’s Economic and Strategic Research Group, directed by Chief Economist Mark Palim, studies current data, analyzes historical and emerging trends, and surveys consumer and mortgage lender groups to deliver forecasts and analyses regarding the economy, housing, and mortgage markets.
About Fannie Mae
Fannie Mae promotes fair and sustainable access to homeownership and affordable rental housing for millions across America. We facilitate the 30-year fixed-rate mortgage and encourage responsible innovations that simplify homebuying and renting. For additional information, visit:
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