Home Prices Continue to Grow but Are Expected to Slow by 2025

In Q2 2024, home prices grew more than expected, but this growth is predicted to slow down. According to Fannie Mae’s Economic and Strategic Research Group, home price growth is expected to end 2024 and 2025, with respective annual rates of 6.1% and 3%. Despite a 30% increase in home listings compared to last year, activity in the housing market remains weak, as seen in the recent decline in home sales. These factors are expected to cause home prices—which rose 3% in Q2 2024—to moderate.

"The housing market continues to wait for affordability to improve, even as the supply of new and existing homes for sale slowly rises," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "The slight decline in mortgage rates of late, following data pointing to gradually slowing economic growth, has not been enough to overcome the significant affordability constraints imposed on would-be homebuyers. As such, despite more homes being listed for sale, actual home sales have not picked up. We continue to expect home price growth on a national level to decelerate – but remain positive -- over the near term, but it should be noted that conditions often vary by region, particularly as it relates to supply. For instance, many Sunbelt metros are currently seeing significant increases in for-sale inventories, in part due to new construction, while supply in much of the Northeast and Midwest remains extremely tight. In aggregate, we expect these varied market conditions to lead to a slight decline in total new home sales nationally for the full-year 2024, but a slight increase in existing homes sales."

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